<SEC-DOCUMENT>0000950123-11-030644.txt : 20110330
<SEC-HEADER>0000950123-11-030644.hdr.sgml : 20110330
<ACCEPTANCE-DATETIME>20110330131113
ACCESSION NUMBER:		0000950123-11-030644
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		10
CONFORMED PERIOD OF REPORT:	20101231
FILED AS OF DATE:		20110330
DATE AS OF CHANGE:		20110330

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MILESTONE SCIENTIFIC INC.
		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:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14053
		FILM NUMBER:		11721304

	BUSINESS ADDRESS:	
		STREET 1:		45 KNIGHTSBRIDGE ROAD
		CITY:			PISCATAWAY
		STATE:			NJ
		ZIP:			08854
		BUSINESS PHONE:		(973) 535-2717

	MAIL ADDRESS:	
		STREET 1:		45 KNIGHTSBRIDGE ROAD
		CITY:			PISCATAWAY
		STATE:			NJ
		ZIP:			08854

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	MILESTONE SCIENTIFIC INC/NJ
		DATE OF NAME CHANGE:	19970409

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	U S OPPORTUNITY SEARCH INC
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>c14776e10vk.htm
<DESCRIPTION>10-K
<TEXT>
<HTML>
<HEAD>
<TITLE>10-K</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 7pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 7pt"><B>FORM 10-K</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 7pt">(Mark One)
</DIV>


<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 7pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT style="font-family: Wingdings">&#254;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<!-- xbrl,dc -->
<DIV align="left" style="font-size: 10pt; margin-top: 7pt; margin-left: 12%"><B>For the fiscal year ended December&nbsp;31, 2010</B></DIV>
<!-- /xbrl,dc -->

<DIV align="center" style="font-size: 10pt; margin-top: 7pt"><B>or</B></DIV>


<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 7pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT style="font-family: Wingdings">&#111;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 7pt; margin-left: 12%"><B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 7pt"><B>
Commission file number 001-14053</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 7pt"><B>Milestone Scientific Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt">
(Exact name of registrant as specified in its charter)</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>13-3545623</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">State or other jurisdiction of
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Incorporation or organization
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 7pt"><B>220 South Orange Avenue, Livingston, NJ 07039</B><BR>
(Address of principal executive offices)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 7pt">Registrant&#146;s telephone number, including area code <B>973-535-2717</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 7pt">Securities registered pursuant to Section&nbsp;12(b) of the Act:</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 7pt">None</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 7pt">Securities registered pursuant to section 12(g) of the Act:</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 7pt">Common Stock, par value $.001 per share</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 7pt; text-indent: 4%">Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405
of the Securities Act. <font style="white-space: nowrap"><FONT style="font-family: Wingdings">&#111;</FONT> Yes <FONT style="font-family: Wingdings">&#254;</FONT> No</font>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 7pt; text-indent: 4%">Indicate by check mark if the registrant is not required to file reports pursuant to Section&nbsp;13
or Section 15(d) of the Act. <font style="white-space: nowrap"><FONT style="font-family: Wingdings">&#111;</FONT> Yes <FONT style="font-family: Wingdings">&#254;</FONT> No</font>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 7pt; text-indent: 4%">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be
filed by Section&nbsp;13 or 15(d) of 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)&nbsp;has been subject to such filing requirements for the past 90&nbsp;days.
<font style="white-space: nowrap"><FONT style="font-family: Wingdings">&#254;</FONT> Yes <FONT style="font-family: Wingdings">&#111;</FONT> No</font>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 7pt; text-indent: 4%">Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule&nbsp;405 of Regulation&nbsp;S-T (&#167;232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such
files).
<font style="white-space: nowrap"><FONT style="font-family: Wingdings">&#111;</FONT> Yes <FONT style="font-family: Wingdings">&#111;</FONT> No</font>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 7pt; text-indent: 4%">Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of
Regulation&nbsp;S-K (&#167; 229.405 of this chapter) is not contained herein and will not be contained, to
the best of registrant&#146;s knowledge, in definitive proxy or information statements
incorporated by reference in Part&nbsp;III of this Form 10-K or any amendment of this Form 10-K.
<FONT style="font-family: Wingdings">&#111;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 7pt; text-indent: 4%">Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148;
in Rule&nbsp;12b-2 of the Exchange Act.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 7pt">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top" nowrap>Large accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Non-accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Smaller reporting company <FONT style="font-family: Wingdings">&#254;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>(Do not check if a smaller reporting company)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 7pt; text-indent: 4%">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of
the Act). Yes <FONT style="font-family: Wingdings">&#111;</FONT> No <FONT style="font-family: Wingdings">&#254;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 7pt; text-indent: 4%">As of June&nbsp;30, 2010, the last business day of the Company&#146;s most recently completed second
fiscal quarter, the aggregate market value of the common stock held by non &#151; affiliates of the
issuer was $10,065,563. This amount is based on the closing price of $1.20 per share of the
Company&#146;s common stock as of such date, based on the Nasdaq Over-the-Counter Bulletin Board.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 7pt; text-indent: 4%">As of March&nbsp;30, 2011 the registrant has a total of 15,030,458 shares of Common Stock, $0.001
par value outstanding.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 7pt">DOCUMENTS INCORPORATED BY REFERENCE
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 7pt; text-indent: 4%">None
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 7pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 1pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="C14776tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>MILESTONE SCIENTIFIC INC.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>Form&nbsp;10-K Annual Report</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>TABLE OF CONTENTS</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776101">PART I</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776102">Item&nbsp;1. Description of Business</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776103">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776104">Item&nbsp;1B. Unresolved Staff Comments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776105">Item&nbsp;2. Description of Property</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776106">Item&nbsp;3. Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776107">Item&nbsp;4. (Removed and Reserved)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776108">PART II</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776109">Item&nbsp;5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Pruchases of Equity Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776110">Item&nbsp;6. Selected Financial Data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776111">Item&nbsp;7. Management&#146;s Discussion and Analysis or Plan of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776112">Item&nbsp;7A. Quantitative and Qualitative Disclosure about Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776113">Item&nbsp;8. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776114">Item&nbsp;9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776115">Item&nbsp;9A. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776116">Item&nbsp;9B. Other Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776117">PART III</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776118">Item&nbsp;10. Directors, Executive Officers, Promoters and Control Persons and Corporate Governance; Compliance with Section
16 (a)&nbsp;of the Exchange Act</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776119">Item&nbsp;11. Executive Compensation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776120">Item&nbsp;12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776121">Item&nbsp;13. Certain Relationships and Related Transactions, and Director Independence</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776122">Item&nbsp;14. Principal Accounting Fees and Services</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776123">PART IV</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#C14776124">Item&nbsp;15. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776125">SIGNATURES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776126">EXHIBITS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 6pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c14776exv10w11.htm">Exhibit 10.11</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c14776exv10w12.htm">Exhibit 10.12</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c14776exv10w13.htm">Exhibit 10.13</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c14776exv10w14.htm">Exhibit 10.14</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c14776exv23w1.htm">Exhibit 23.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c14776exv31w1.htm">Exhibit 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c14776exv31w2.htm">Exhibit 31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c14776exv32w1.htm">Exhibit 32.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c14776exv32w2.htm">Exhibit 32.2</A></FONT></TD></TR>
</TABLE>
</DIV>
<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><I>Certain statements made in this Annual Report on </I><I>Form 10-K</I><I> are &#147;forward-looking statements&#148;
(within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans
and objectives of management for future operations. Such statements involve known and unknown
risks, uncertainties and other factors that may cause actual results, performance or achievements
of Milestone to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. The forward-looking statements included
herein are based on current expectations that involve numerous risks and uncertainties. Milestone&#146;s
plans and objectives are based, in part, on assumptions involving the continued expansion of
business. Assumptions relating to the foregoing involve judgments with respect to, among other
things, future economic, competitive and market conditions and future business decisions, all of
which are difficult or impossible to predict accurately and many of which are beyond the control of
Milestone. Although Milestone believes that its assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate. In light of the
significant uncertainties inherent in the forward-looking statements included herein, particularly
in view of Milestone&#146;s early stage operations, the inclusion of such information should not be
regarded as a representation by Milestone or any other person that the objectives and plans of
Milestone will be achieved. The Company undertakes no obligation to revise or update publicly any
forward-looking statements for any reason.</I>
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">
<DIV align="left">
<A name="C14776101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART I</B>
</DIV>

<DIV align="left">
<A name="C14776102"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;1.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Description of Business</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">All references in this report to &#147;Milestone,&#148; &#147;us,&#148; &#147;the Company&#148;, or &#147;Milestone Scientific&#148;
refer to Milestone Scientific Inc., and its former subsidiary, Spintech, Inc. (&#147;Spintech&#148;), unless
the context otherwise indicates. Milestone has rights to the following trademarks:
<I>CompuDent</I><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I>, <I>CompuMed</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP>, <I>CompuFlo</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP><I>, The Wand</I><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I>, <I>The Wand
Plus</I><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I>, <I>The SafetyWand</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP>, <I>Cool Blue Wand</I><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I>, <I>Cool Blue Tooth Whitening
Instrument</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I>&#153;</I></SUP><I>, Dynamic Pressure Sensing Technology</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP>, <I>STA</I><SUP style="FONT-size: 85%; vertical-align: text-top"> </SUP><I>Single
Tooth Anesthesia</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I>&#153;</I></SUP>, (STA Instrument, instruments and handpieces), <I>Ionic White</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP>
(light emitting diode), and <I>Ionic White</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I>&#153;</I></SUP> (whitening toothpaste). Milestone was
incorporated in the State of Delaware in 1989.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>BUSINESS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Background</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone since its inception has engaged in pioneering proprietary, innovative,
computer-controlled injection technologies and solutions for the medical and dental markets. The
company has focused its energy and resources on redefining the worldwide standard of care for
injection techniques by making the experience more comfortable for the patient and by reducing the
anxiety and stress of administering injections for the healthcare provider.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone and its technology is widely recognized by key opinion leaders, industry experts and
medical and dental practitioners as the noted leader in the emerging, high growth,
computer-controlled injection industry; and remains intent on expanding the use and application of
its proprietary, patented technologies to achieve greater operational efficiencies, enhanced
patient safety and therapeutic adherence, and improved quality of care within a broad range of
medical disciplines.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 1997, Milestone first introduced <I>The Wand</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP> (<I>CompuDent</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> </I></SUP>instrument)
and the disposable <I>Wand </I>handpiece. <I>CompuDent </I>provides painless injections for all routine dental
treatments, including root canals, crowns, fillings and cleanings. Milestone&#146;s Computer-Controlled
Local Anesthetic Delivery (C-CLAD) instrument handpiece does not look or feel like a syringe. And,
what&#146;s more, it works better than a syringe, resulting in a more pleasant experience for the
patient and practitioner. With more than 18,000 <I>CompuDent </I>instruments sold within four months of
its market introduction, this represented the most successful launch in the history of small
equipment sales in U.S. dentistry.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone subsequently expanded its product offerings with the introduction of the
<I>CompuMed</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP> advanced injection instrument, designed for use in a wide range of
applications within the medical industry, including cosmetic surgery, hair restoration surgery,
podiatry, colorectal surgery, nasal and sinus surgery, dermatology and orthopedics, among others.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Central to Milestone&#146;s intellectual property platform and current product development strategy
is its patented <I>CompuFlo</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP> technology for the precise delivery of medicaments<B>. </B>The
<I>CompuFlo </I>pressure/force C-CLAD technology is an advanced, patented and FDA-approved medical
technology for the painless and accurate delivery of drugs, anesthetics and other medicaments into
all tissue types, as well as for the aspiration of bodily fluids or previously injected substances.
Its regulation and control of flow rate continues to provide the <I>CompuDent </I>and <I>CompuMed </I>benefits
of painless injections, while its <I>Dynamic Pressure Sensing</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP> capability provides visual
and audible in-tissue pressure feedback, identifying tissue types to the healthcare provider. This
pressure feedback extends the benefit of painlessness from anesthetics with known viscosities to a
wide range of liquid drugs and other medicaments with varying viscosities and flow rates. <I>Dynamic
Pressure Sensing </I>also allows the healthcare provider to know when certain types of tissues have
been penetrated and permits the healthcare provider to inject medicaments precisely at the desired
location. Thus, pressure feedback can prevent the suffusion of tissue outside the intended target
area, a vitally important characteristic in the injection of chemotherapeutics and other toxic
substances.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The <I>CompuFlo </I>technology consists of two critical elements. One element is the ability to
determine exit pressure <I>In Situ </I>(in the injection site tissue) at the tip of the needle in real
time. This minimizes tissue damage (and eliminates the pain of the injection) because the flow
rate and pressure of the injection are controlled. The other critical element of the technology is
an integrated injection database of algorithms that have been defined which allow for the
measurement of the exit pressure. This database of algorithms contains the critical components of
specific drugs, parameters of needles, tubing and syringes and all other pertinent components for
the safe and efficacious delivery of medications for all procedures.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The <I>CompuFlo </I>technology also consists of a disposable injection handpiece that provides for
precise tactile control during the injection, an electromechanical (computer-controlled) fluid
delivery instrument and the ability to record data from the injection event. As confirmed by
numerous noted medical and dental experts within academia and the clinical practice arenas,
<I>CompuFlo </I>has the potential to greatly increase the safety and efficacy of many injection procedures
that currently rely upon the over 150-year-old hypodermic syringe technology and the tactile senses
and delivery expertise of the administrator.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On September&nbsp;14, 2004, Milestone Scientific was issued United States Patent No.&nbsp;6,786,885 for
the <I>CompuFlo </I>technology, entitled &#147;Pressure/Force Computer Controlled Drug Delivery Instrument with
Exit Pressure.&#148; Proprietary software, working with an innovative technology, allows the instrument
to continuously monitor and control the exit pressure of fluid and/or medication during an
injection. This same technology also enables doctors to accurately identify different tissue types
based on exit pressure during an injection. The technology has numerous applications in both
medicine and dentistry, including epidural and intra-articular injections.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2004, the United States Patent Office issued a &#147;Notice of Allowance&#148; for patent
protection on two additional critical elements of the <I>CompuFlo </I>automated drug delivery technology:
&#147;Drug Delivery Instrument with Profiles&#148; and &#147;Pressure/Force Computer Controlled Drug Delivery with
Automated Charging&#148;.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2005, Milestone submitted a pre-market notification to the US Food and Drug
Administration (FDA)&nbsp;on its <I>CompuFlo </I>technology, which was subsequently cleared by the FDA in July
of 2006. This initial submission was critical for Milestone&#146;s continuing efforts to develop and
commercialize this important technology. Milestone has identified a number of potential
applications for <I>CompuFlo</I>, including single-tooth dental injections, self-administered drug
delivery, osteoarthritis joint pain management and epidurals.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Given the Company&#146;s experience and established brand awareness within the dental industry, it
elected to focus its initial product development efforts on the integration of <I>CompuFlo </I>into its
legacy computer-controlled dental injection instrument. As a result, Milestone developed the
industry&#146;s first solution for painlessly administering a single-tooth injection as the only
injection necessary for achieving anesthesia, foregoing the need to administer a traditional nerve
branch block. This new instrument, which also provides for use of a disposable handpiece, was
trademarked the &#147;<I>STA Single Tooth Anesthesia Instrument</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I>&#153;</I></SUP>,&#148; now more commonly known as
the <I>STA Instrument</I>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">After receiving FDA 510(k) Pre-market Notification acceptance for the marketing and sale of
the <I>STA Instrument, </I>Milestone introduced the instrument to market in February&nbsp;2007 at the Chicago
Dental Society&#146;s 143<SUP style="FONT-size: 85%; vertical-align: text-top">rd</SUP> Midwinter Meeting. The patented <I>STA Instrument </I>incorporates the
&#147;pressure feedback&#148; elements of Milestone&#146;s patented <I>CompuFlo </I>technology, thereby allowing dentists
to administer injections accurately and painlessly into the periodontal ligament space, effectively
anesthetizing a single tooth. This injection is of significant value in that it allows the dentist
to profoundly anesthetize the tooth within one or two minutes, versus up to 15-18 minutes for a
block injection to take effect. Utilizing the <I>STA Instrument </I>single tooth injection, the patient
will suffer neither pain nor collateral anesthesia in the cheek, lips or tongue at any time. The
<I>STA Instrument </I>is capable of performing all of the injections that can be done with a conventional
dental syringe, including the palatal-anterior superior alveolar, anterior middle superior alveolar
and inferior alveolar nerve block. The <I>STA Instrument </I>achieves these injections predictably and
reliably.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Initial market response to the <I>STA Instrument </I>following its commercial debut in February&nbsp;2007
proved to be less than robust. Moreover, at that time, the Company had granted exclusive US and
Canadian distribution and marketing rights for the <I>STA Instrument </I>to Henry Schein, Inc., the
largest distributor of healthcare products and services to office-based practitioners in the
combined North American and European markets. Following several months of lackluster sales and
after making critical senior management changes, Milestone initiated an in-depth market study to
reassess its positioning and marketing strategies for the <I>STA Instrument</I>. The insight gained from
this study led management to redefine and implement a new messaging platform, created to emphasize
key benefits that Milestone discovered are of most value to dental professionals. This new product
messaging was launched in January&nbsp;2008 and has remained in constant review.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During the second quarter of 2008, Milestone elected not to renew the exclusive marketing and
distribution agreement originally signed with Henry Schein, Inc.; instead, the Company granted
Schein non-exclusive distribution rights to both market and sell the <I>STA Instrument </I>and related
disposable handpieces to dental professionals in the U.S. and Canada. In June&nbsp;2008, Milestone
expanded its domestic distribution network with the addition of Patterson Dental Supply as a
non-exclusive distributor. Patterson has the largest direct sales force in the industry, totaling
approximately 1,400 sales representatives and equipment/software specialists addressing the needs
of the U.S. and Canadian dental markets. Later in the year, Benco Dental, Burkhart Dental, Goetze
Dental and Atlanta Dental Supply &#151; all notable regional distributors &#151; were granted non-exclusive
distribution and marketing rights to the <I>STA Instrument</I>, thereby diversifying and significantly
expanding Milestone&#146;s domestic distribution network.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Despite being granted CE Mark approval of the <I>STA Instrument </I>in June&nbsp;2007 by European
regulatory authorities, Milestone elected to initiate its international launch in the first quarter
of 2008. Following implementation of the <I>STA Instrument</I>&#146;s new messaging strategy in early 2008,
Milestone granted exclusive marketing and distribution rights to two foreign distributors:
Istrodent Pty Ltd AB, a leading distributor serving the Southern Africa dental market; and Unident
AB, a leading supplier of dental products in the Scandinavian countries of Denmark, Sweden, Norway
and Iceland.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2009, the Company sought to further expand its independent distribution network &#151; both
domestically and in key international markets. Consequently, Milestone granted non-exclusive
distribution and marketing rights in the U.S. to Cedar Dental, Dental Health Products, Iowa Dental,
Nashville Dental, Newark Dental and Parkway Dental. To expand and enhance its reach to the dental
community in Canada, the Company also signed non-exclusive distribution and marketing agreements
with Dental 2000, Mediclub and Specialty Dental
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In the spring of 2009, Milestone signed an Exclusive Distribution and Marketing Agreement with
China National Medicines Corporation, dba Sinopharm, which is China&#146;s largest domestic
manufacturer, distributor and marketer of pharmaceuticals and importer of medical devices and the
country&#146;s largest domestic distributor of dental anesthetic carpules to the Chinese dental
industry. Prior to the end of 2009, China National Medicines issued Milestone a blanket purchase
order for 12,000 <I>STA </I>instruments and related handpieces to be delivered over 36&nbsp;months, thereby
marking the Company&#146;s initial penetration into China&#146;s emerging dental market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of March&nbsp;30, 2011, China National Medicine has not received the appropriate registration
approval from the regulatory body in China, therefore, shipment of STA instruments and handpieces
have been suspended pending the approval to sell and distribute these products in China. It is
expected that the approval by the appropriate Chinese regulatory body will be received in 2011.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">According to a report published by the U.S. Department of Commerce, titled &#147;China&#146;s Emerging
Markets: Opportunities in the Dental and Dental Lab Industry,&#148; China&#146;s dental market lags behind
other healthcare services and has largely been neglected in the past. In fact, CS Market Research
reports that &#147;of China&#146;s 1.3&nbsp;billion plus population, 50% of the adults and 70% of the children are
estimated to have decayed tooth problems, and over 90% have periodontal disease.&#148; However, with
increasing affluence of the Chinese population, as well as increasing attention towards personal
care, demand for dental services has been growing. Market research firm Freedonia agrees, noting
that demand for dental products in China is expected to climb to 21.5&nbsp;billion RMB (US$3.15&nbsp;billion)
by 2012, due primarily to escalating personal income levels and government programs promoting
awareness of the benefits of good oral care.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Shortly before the end of the second quarter of 2009, Milestone elected to refine its
international marketing strategy to gain greater access to and penetration of the international
dental markets. The new sales strategy provides for increasing hands-on oversight and support of
its existing international distribution network, while also attracting new distributors throughout
Europe, Asia and South America.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Beginning in the second and third quarter 2010, Milestone expanded its international and
domestic sales force by hiring a Director of International Sales and Director of Domestic Sales.
These additions have proven to be a valuable addition to our dental market business, as we expand
our distribution in both markets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>CompuFlo</I></B><B><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> Advanced Injection Technology &#151; Core Technology</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The <I>CompuFlo </I>technology is patented and embedded in the <I>STA Instrument </I>that is being sold
worldwide in the dental market. <I>CompuFlo </I>technology has been tried and proven in human and animal
studies, as well as by dentists in most parts of the world who are using the <I>STA Instrument </I>in
their practices.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>CompuFlo </I>is a revolutionary new technology for injections. <I>CompuFlo </I>enables health care
practitioners to monitor and precisely control &#147;pressure,&#148; &#147;rate&#148; and &#147;volume&#148; during all
injections and can be used to inject all liquid medicaments as well as anesthetics. <I>CompuFlo </I>can
also be used to aspirate body fluids.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Negative side effects from the use of traditional hypodermic drug delivery injection
instruments are well documented in dental and medical literature and include risk of death,
transient or permanent paralysis, pain, tissue damage and post-operative complications. The pain
and tissue damage are a direct result of uncontrolled flow rates and pressures that are created
during the administration of drug solutions into human tissue. While several technologies have been
capable of controlling flow rate, the ability to accurately and precisely control pressure has been
unobtainable until the development of <I>CompuFlo.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Precisely controlling in-tissue pressure increases patient safety by reducing the risk of
tissue damage and post-treatment pain related to excessive pressure that may occur during certain
injections. Identification of the tissue, in which the needle tip is imbedded, is believed to be
highly important in epidural injections, intra-articular injections and numerous organ,
subcutaneous and intramuscular injections.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>CompuFlo</I>&#146;s pressure sensing technology provides an objective tool that consistently and
accurately identifies the epidural space by detecting the difference in pressure between the
ligamentum flavum and the extraligamentary tissue. In studies utilizing the <I>CompuFlo </I>technology the
epidural space has been correctly identified 100% of the time. Knowing the precise location of a
needle during an epidural injection procedure provides a measure of safety not presently available
to doctors using conventional syringes, who identify the epidural space by relying on the
subjective perception of loss of resistance to air or saline.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In the absence of curative procedures, arthritis patients are obliged to endure multiple
painful test procedure injections for a lifetime. Often these injections are not efficacious,
because the doctor using a syringe failed to locate the intra-articular space or did not inject the
appropriate volume of hyaluronic acid or other medicament into that space. The <I>CompuFlo</I><SUP style="FONT-size: 85%; vertical-align: text-top">
</SUP>technology has been successful in administering viscous hyaluronic acid and other medicaments
into the intra-articular space in both small and large joints using its computer-controlled
pressure sensing capabilities in an independent animal study.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There are a number of injectable drugs routinely self-administered in a home or office setting
using spring loaded automatic injection devices by people who suffer from long term chronic
conditions such as Multiple Sclerosis and Rheumatoid Arthritis. The <I>CompuFlo </I>technology, using
pressure sensing capabilities, can serve as a painless subcutaneous injection method for these
self-administered drugs. A significant reduction in pain during delivery will have a positive
impact on compliance, which is a major consideration when physicians are determining which drugs to
prescribe.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On December&nbsp;3, 2009, Milestone announced that it signed an Agreement of Intent with China
National Medicines Corporation, Ltd. and Yichang Humanwell Pharmaceutical Co. Ltd., both
incorporated in the People&#146;s Republic of China (PRC), to develop orthopedic and epidural drug
delivery instruments utilizing <I>CompuFlo</I>. Milestone and its two PRC joint venture partners planned
to establish a new joint venture entity for this purpose in the first quarter of 2010. The
required initial funding for the new entity, estimated by the parties at $1.4&nbsp;million, will be
provided by the two PRC companies, although Milestone will determine the proposed uses of their
contribution. The Company believes that this new joint venture represents a significant step
forward in Milestone&#146;s efforts to have its innovative computer-controlled drug delivery technology
adapted for medical usage worldwide. As of March&nbsp;30, 2011, the agreement has not been finalized.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Product Platform</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone has developed and brought to market a highly differentiated portfolio of industry
innovations. Thus far, the Company&#146;s proprietary solutions have succeeded in elevating the
standard of care in the professional dental arena. The product portfolio includes:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>STA Single Tooth Anesthesia Instrument</I></B><B><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#153;</SUP> (STA Instrument)</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The <I>STA Single Tooth Anesthesia Instrument&#153; (STA Instrument) </I>is a patented,
computer-controlled local anesthesia delivery instrument that incorporates the &#147;pressure feedback&#148;
elements of Milestone&#146;s patented <I>CompuFlo </I>technology, thereby allowing dentists to administer
injections accurately into the periodontal ligament space, effectively anesthetizing a single
tooth. While the periodontal ligament injection has been available for some time, there has been no
effective technology that allows dentists to easily perform the procedure painlessly, safely and
predictably until now. With this unique procedure dentists can easily and predictably anesthetize a
single tooth root in one minute and a multiple root tooth in two minutes, without first
administering a general blocking injection and waiting up to 18 minutes (or longer if the blocking
injection needs to be re-administered) before proceeding to anesthetize the target tooth. A device
which allows dentists to effectively anesthetize a single tooth will greatly enhance the
productivity of dental practices and, when combined with the painless injection capabilities
already present in the <I>CompuDent </I>instrument, such a device provides a compelling value in the
marketplace. The <I>STA Instrument </I>will generate recurring revenues from per-patient disposable
handpieces.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Since its market introduction in the spring of 2007, the <I>STA Instrument </I>has received rave
reviews and awards from the dental industry. In July&nbsp;2007, noted industry publication <I>Dentistry
Today </I>featured the <I>STA Instrument </I>as one of the &#147;Top 100 Products in 2007,&#148; helping to promote much
broader recognition of the instrument and validating <I>STA</I>&#146;s value proposition for dentists and
patients, alike. In early 2008, <I>Medical Device &#038; Diagnostic Industry </I>magazine distinguished the
<I>STA Instrument </I>as a 2008 Medical Design Excellence Award winner in the &#147;Dental Instruments,
Equipment and Supplies&#148; product category. Of the 33 products to receive this coveted award, the
<I>STA </I>was one of only two winning products that serve dental practitioners. In December&nbsp;2008,
Milestone continued to win broad acclaim for the <I>STA Instrument
</I>by winning a &#147;Townie Choice Award<I>&#148;</I>.
The &#147;Townie Choice&#148; awards were originally started by Dr.&nbsp;Howard Darran and Farran Media,
publisher of <I>Dentaltown Magazine</I>, to assist dentists in making product purchasing decisions, and
are considered the &#147;people&#146;s choice&#148; of the products and services available to the dental industry
today. That same month, the <I>STA Instrument </I>was also named as a <I>Dental Products Report </I>&#147;Top 100
2008 Product of Distinction.&#148; Additionally, the <I>STA Instrument </I>was named one of Dentistry Today&#146;s
&#147;Top 100 Products&#148; for the third consecutive year in 2010.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>CompuDent</I></B><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>CompuDent </I>(also known as the <I>Wand Plus</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP> internationally) is Milestone&#146;s
proprietary, patented Computer-Controlled Local Anesthetic Delivery (C-CLAD) instrument and
predecessor of the <I>STA Instrument</I>. CompuDent delivers anesthesia at a precise and consistent rate
below a patient&#146;s pain threshold. Over the years, <I>CompuDent </I>has been widely heralded as a
revolutionary device, considered one of the major advances in dentistry in the 20<SUP style="FONT-size: 85%; vertical-align: text-top">th</SUP>
Century. The instrument has been favorably evaluated in more than 50 peer reviewed or independent
clinical research reports. <I>CompuDent</I>, including its ergonomically designed single-use handpieces
(<I>The Wand</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP><I>)</I>, provides numerous, well documented benefits:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>CompuDent </I>minimizes the pain associated with palatal, mandibular block and all other injections,
resulting in a more comfortable injection experience for the patient;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the pencil grip used with <I>The Wand </I>handpieces allows unprecedented tactile sense and accurate control;</DIV></TD>
</TR>


</TABLE>
</DIV><P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">


<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">new injections made possible with the <I>CompuDent </I>technology eliminate collateral numbness of the
tongue, lips and facial muscles;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">bi-directional rotation of <I>The Wand </I>handpieces eliminates needle deflection resulting in greater
success and more rapid onset of anesthesia in mandibular block injections;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the use of a single patient use, disposable handpieces minimizes the risk of cross contamination; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the ergonomic design of <I>The Wand </I>handpieces makes an injection easier and less stressful to
administer, lowering the risk of carpal tunnel syndrome.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Despite <I>CompuDent&#146;s </I>many benefits, including the administration of less painful and more
comfortable injections, dentists in the United States have been slow to give up the use of
traditional syringes. Dentists have all been trained to use syringes in dental school and often
have become accustomed to and are comfortable with their use during many years of clinical
practice, in spite of the obvious reluctance and/or fear of the patient in relation to injections
administered by hypodermic syringe. There are approximately 40&nbsp;million dental phobics, those people
afraid to visit a dentist, in the United States. Therefore, Milestone believes there is a
disconnect in the way dentists perceive their patients&#146; attitudes toward injection by hypodermic
syringe. The <I>CompuDent </I>is used today by thousands of dentists around the world, many of whom have
long since abandoned the over 150-year old syringe.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>CompuMed</I></B><SUP style="FONT-size: 85%; vertical-align: text-top"><B><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>CompuMed </I>is a patented computer-controlled injection instrument geared to the needs of the
medical market and providing benefits similar to <I>CompuDent. CompuMed </I>allows many medical
procedures, now requiring intravenous sedation, to be performed with only local anesthesia due to
dramatic pain reduction. Also, dosages of local anesthetic can often be significantly reduced, thus
reducing side effects, accelerating recovery times, lowering costs and eliminating potential
complications. <I>CompuMed </I>has accumulated clinical evidence demonstrating benefits from use in
colorectal surgery; podiatry; dermatology, including surgery for the removal of basal cell
carcinomas and other oncological dermatologic procedures; nasal and sinus surgery, including
rhinoplasty; hair transplantation and cosmetic surgery, among others.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>The Wand</I></B><SUP style="FONT-size: 85%; vertical-align: text-top"><B><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></B></SUP>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>The Wand </I>handpiece is used in conjunction with the <I>STA, CompuDent </I>and <I>CompuMed </I>instruments.
It is an ergonomically designed and patented handpieces that enables all traditional and newer
injections, such as AMSA, P-ASA and Modified-PDL, to be more comfortable and easier to deliver.
Moreover, the pen-like grasp of <I>The Wand </I>allows bi-directional rotation during injection, which
prevents needle deflection that occurs with a traditional syringe. A straighter path results in a
more accurate injection, meaning fewer missed mandibular blocks, and more rapid onset of
anesthesia. Missed blocks are reported in the literature to occur 30% of the time. This raises both
patient anxiety and difficulties for the dentists in managing their business. While awaiting
profound anesthesia, the dentist is losing time and money.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>The SafetyWand</I></B><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>The SafetyWand </I>is the first, patented safety-engineered injection device that conforms to
regulatory standards while also meeting the clinical needs of dental and medical practitioners.
Following the adoption of the Federal Needlestick Safety and Prevention Act, Milestone developed,
and in September&nbsp;2003 the FDA approved marketing of, Milestone&#146;s <I>SafetyWand </I>disposable handpiece, a
patented injection device that incorporates safety engineered sharp protection features to aid in
the prevention of needlesticks. <I>The SafetyWand </I>is the first patented injection device to be fully
compliant with OSHA regulations under the federal Needlestick Safety Act while meeting the clinical
needs of dentists.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>The SafetyWand </I>represents the culmination of two years&#146; effort to develop a safer injection
device for dentists, physicians and hygienists. While safety injection devices have been mandated
since 2000 under federal law, OSHA had been unable to enforce this law against dentists because of
the inadequacy of existing devices to meet both the requirements of the law and the clinical needs
of dentists. The <I>SafetyWand </I>meets these requirements and provides dental practitioners with a safer
retractable needle device, with single hand activation, which is reusable multiple times during a
single patient visit; yet small and sleek enough not to obscure the dentist&#146;s sometimes limited
field of view. While <I>SafetyWand </I>is now available commercially and OSHA has not begun, in a
meaningful way, to enforce existing regulations requiring the use of these devices. OSHA is
empowered to levy substantial fines for failure to use safety engineered devices.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Competition</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone&#146;s proprietary, patented Computer-Controlled Local Anesthesia Delivery (C-CLAD)
instruments compete with disposable and reusable syringes that generally sell at lower prices and
that use established and well-understood methodologies in both the dental and medical marketplaces.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone&#146;s instruments compete on the basis of their performance characteristics and the
benefits provided to both the practitioner and the patient. Clinical studies have shown that the
instruments reduce fear, pain and anxiety for many patients, and Milestone believes that they can
reduce practitioner stress levels, as well. The Company&#146;s newest product introduction, the <I>STA
Instrument</I>, can be used for all dental injections that can be performed with a traditional dental
syringe. Moreover, the <I>STA Instrument </I>can also be used for new and modified dental injection
techniques that cannot be performed with traditional syringes. These new techniques allow for
faster procedures shortening chair-time, minimizing the numbing of the lips and facial muscles,
enhancing practice productivity, reducing stress and virtually eliminating pain and anxiety for
both the patient and the dentist.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone faces intense competition from many companies in the medical and dental device
industry, possessing substantially greater financial, marketing, personnel, and other resources.
Most competitors have established reputations, stemming from their success in the development,
sale, and service of competing dental products. Further, rapid technological change and research
may affect the products. Current or new competitors could, at any time, introduce new or enhanced
products with features that render the products less marketable or even obsolete. Therefore, the
company must devote substantial efforts and financial resources to improve existing products, bring
products to market quickly, and develop new products for related markets. In addition, the ability
to compete successfully requires that Milestone establish an effective distribution network and
with a strong marketing plan. Historically, Milestone has been unsuccessful in executing the
marketing plans for the products, primarily due to resource constraints. New products must be
approved by regulatory authorities before they may be marketed. Milestone cannot assure you that it
can compete successfully; that competitors will not develop technologies or products that render
the products less marketable or obsolete; or, that Milestone will succeed in improving the existing
products, effectively develop new products, or obtain required regulatory approval for those
products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Patents and Intellectual Property</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone holds the following U.S. utility and design patents:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>U.S. PATENT</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>DATE OF</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>NUMBER</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>ISSUE</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>Computer Controlled Drug Delivery Systems</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dental Anesthetic and Delivery Injection Unit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,022,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/8/2000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Design for a Dental Anesthetic Delivery System Holder</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">D422,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/4/2000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Design for a Dental Anesthetic Delivery System Housing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">D423,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/25/2000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Design for a Dental Anesthetic Delivery System Handle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">D427,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/27/2000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cartridge Holder for Injection Device</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,132,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/17/2000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dental Anesthetic Delivery Injection Unit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,152,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/28/2000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Microprocessor-controlled Fluid Dispensing Apparatus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,159,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/12/2000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pressure/Force Computer Controlled Drug Delivery System</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,200,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/13/2001</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dental Anesthetic and Delivery Injection Unit with Automated Rate Control</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,652,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/25/2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pressure/Force Computer Controlled Drug Delivery System with Exit Pressure</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,786,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/14/2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pressure/Force Computer Controlled Drug Delivery System with Automated Charging</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,887,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5/3/2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Drug Delivery System with Profiles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,945,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/20/2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cartridge Holder for Anesthetic and Delivery Injection Device</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">D558,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/25/2007</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Design for Drive Unit for Anesthetic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">D566,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/8/2008</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Design for Drive Unit for Anesthetic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">D579,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/28/2008</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Drug Infusion Device with Tissue Identification Using Pressure Sensing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,449,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/11/2008</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computer Controlled Drug Delivery Systems with Pressure Sensing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,618,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/17/2009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hand Piece for Fluid Administration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,625,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/1/2009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Self-Administration Injection System</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,740,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/22/2010</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>Engineered Sharps Injury Protection Devices</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Handpiece for Injection Device with a Retractable and Rotating Needle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,428,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/6/2002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Safety IV Catheter Device</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,726,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/27/2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Safety IV Catheter Infusion Device</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,905,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/14/2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Handpiece for Injection Device with a Retractable and Rotating Needle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,966,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/22/2005</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During the 2010 and 2009 fiscal years, Milestone expensed $270,494 and $241,318, respectively,
on research and development activities. The higher costs incurred in 2010 were primarily associated
with the continued development of the Single Tooth Anesthetic (STA)&nbsp;delivery instrument and
continuing efforts on developing medical products utilizing the <I>CompuFlo </I>technology.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone relies on a combination of patent, copyright, trade secret, and trademark laws and
employee and third party nondisclosure agreements to protect intellectual property rights. Despite
the precautions taken by Milestone to protect the products, unauthorized parties may attempt to
reverse engineer, copy, or obtain and use products and information that Milestone regarded as
proprietary, or may design products serving similar purposes that do not infringe on Milestone&#146;s
patents. The Company&#146;s failure to protect its proprietary information and the expenses of doing so
could have a material adverse effect on the operating results and financial condition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In the event that the products infringe upon patent or proprietary rights of others, Milestone
may be required to modify processes or to obtain a license. There can be no assurance that
Milestone would be able to do so in a timely manner, upon acceptable terms and conditions, or at
all. The failure to do so would have a material adverse effect on the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Government Regulation</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The FDA cleared the <I>CompuDent </I>instrument and its disposable handpieces for marketing in the
U.S. for dental applications in July&nbsp;1996; the <I>CompuMed </I>instrument for marketing in the U.S. for
medical applications in May&nbsp;2001; and, the <I>Safety Wand </I>for marketing in the U.S. for dental
applications in September&nbsp;2003. For us to commercialize the other products in the U.S., Milestone
will have to submit additional 510(k) applications with the FDA. Milestone received FDA 510 (k)
approval for the <I>STA Instrument </I>in August&nbsp;2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The manufacture and sale of medical devices and other medical products are subject to
extensive regulation by the FDA pursuant to the FDC Act, and by other federal, state and foreign
authorities. Under the FDC Act, medical devices must receive FDA clearance before they can be
marketed commercially in the U.S. Some medical products must undergo rigorous pre-clinical and
clinical testing and an extensive FDA approval process before they can be marketed. These processes
can take a number of years and require the expenditure of substantial resources. The time required
for completing such testing and obtaining such approvals is uncertain, and FDA clearance may never
be obtained. Delays or rejections may be encountered based upon changes in FDA policy during the
period of product development and FDA regulatory review of each product submitted. Similar delays
also may be encountered in other countries. Following the enactment of the Medical Device
Amendments to the FDC Act in May&nbsp;1976, the FDA classified medical devices in commercial
distribution into one of three classes. This classification is based on the controls necessary to
reasonably ensure the safety and effectiveness of the medical device. Class&nbsp;I devices are those
devices whose safety and effectiveness can reasonably be ensured through general controls, such as
adequate labeling, pre-market notification, and adherence to the FDA&#146;s Quality Instrument
Regulation (&#147;QSR&#148;), also referred to as &#147;Good Manufacturing Practices&#148; (&#147;GMP&#148;) regulations. Some
Class&nbsp;I devices are further exempted from some of the general controls. Class&nbsp;II devices are those
devices whose safety and effectiveness reasonably can be ensured through the use of special
controls, such as performance standards, post-market surveillance, patient registries, and FDA
guidelines. Class&nbsp;III devices are those which must receive pre-market approval by the FDA to ensure
their safety and effectiveness. Generally, Class&nbsp;III devices are limited to life-sustaining,
life-supporting or implantable devices.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If a manufacturer or distributor can establish that a proposed device is &#147;substantially
equivalent&#148; to a legally marketed Class&nbsp;I or Class&nbsp;II medical device or to a Class&nbsp;III medical
device for which the FDA has not required pre-market approval, the manufacturer or distributor may
seek FDA marketing clearance for the device by filing a 510(k) Pre-market Notification. The 510(k)
Pre-market Notification and the claim of substantial equivalence may have to be supported by
various types of data and materials, including test results indicating that the device is as safe
and effective for its intended use as a legally marketed predicate device. Following submission of
the 510(k) Pre-market Notification, the manufacturer or distributor may not place the device into
commercial distribution until an order is issued by the FDA. By regulation, the FDA has no specific
time limit by which it must respond to a 510(k) Pre-market Notification. At this time, the FDA
typically responds to the submission of a 510(k) Pre-market Notification within 90&nbsp;days. The FDA
response may declare that the device is substantially equivalent to another legally marketed device
and allow the proposed device to be marketed in the U.S. However, the FDA may determine that the
proposed device is not substantially equivalent or may require further information, such as
additional test data, before the FDA is able to make a determination regarding substantial
equivalence. Such determination or request for additional information could delay market
introduction of products and could have a material adverse effect on us. If a device that has
obtained 510(k) Pre-market Notification clearance is changed or modified in design, components,
method of manufacture, or intended use, such that the safety or effectiveness of the device could
be significantly affected, separate 510(k) Pre-market Notification clearance must be obtained
before the modified device can be marketed in the U.S.. If a manufacturer or distributor cannot
establish that a proposed device is substantially equivalent to a legally marketed device, the
manufacturer or distributor will have to seek pre-market approval of the proposed device, a more
difficult procedure requiring extensive data, including pre-clinical and human clinical trial data,
as well as extensive literature to prove the safety and efficacy of the device.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Though the <I>STA Instrument, CompuDent</I>, the <I>Safety Wand </I>and <I>CompuMed </I>have received FDA marketing
clearance, there can be no assurance that any of the other products under development will obtain
the required regulatory clearance in a timely manner, or at all. If regulatory clearance of a
product is granted, such clearance may entail limitations on the indicated uses for which the
product may be marketed. In addition, modifications may be made to the products to incorporate and
enhance their functionality and performance based upon new data and design review. There can be no
assurance that the FDA will not request additional information relating to product improvements;
that any such improvements would not require further regulatory review, thereby delaying the
testing, approval and commercialization of product improvements; or, that ultimately any such
improvements will receive FDA clearance.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Compliance with applicable regulatory requirements is subject to continual review and will be
monitored through periodic inspections by the FDA. Later discovery of previously unknown problems
with a product, manufacturer, or facility may result in restrictions on such product or
manufacturer, including fines, delays or suspensions of regulatory clearances, seizures or recalls
of products, operating restrictions and criminal prosecution and could have a material adverse
effect on the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone is subject to pervasive and continuing regulation by the FDA, whose regulations
require manufacturers of medical devices to adhere to certain QSR requirements as defined by the
FDC Act. QSR compliance requires testing, quality control and documentation procedures. Failure to
comply with QSR requirements can result in the suspension or termination of production, product
recall or fines and penalties. Products also must be manufactured in registered establishments. In
addition, labeling and promotional activities are subject to scrutiny by the FDA and, in certain
circumstances, by the Federal Trade Commission. The export of devices is also subject to regulation
in certain instances.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Medical Device Reporting (&#147;MDR&#148;) regulation obligates us to provide information to the FDA
on product malfunctions or injuries alleged to have been associated with the use of the product or
in connection with certain product failures that could cause serious injury. If, as a result of FDA
inspections, MDR reports or other information, the FDA believes that Milestone are not in
compliance with the law, the FDA can institute proceedings to detain or seize products, enjoin
future violations, or assess civil and/or criminal penalties against us, the officers or employees.
Any action by the FDA could result in disruption of operations for an undetermined time.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In June&nbsp;2007, Milestone received a CE mark for the marketing of the <I>STA Instrument </I>in Europe.
In June&nbsp;2003 Milestone received a CE mark for marketing of the <I>Safety Wand </I>and <I>The Wand </I>Handpieces
with Needle in Europe. In July&nbsp;2003, Milestone obtained regulatory approval to sell <I>CompuDent </I>and
its handpieces in Australia and New Zealand.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Product Liability</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Failure to use any of the products in accordance with recommended operating procedures could
potentially result in health hazards or injury. Failures of the products to function properly could
subject the company to claims of liability. Milestone maintains liability insurance in an amount
that Milestone believes is adequate. However, there can be no assurance that the insurance coverage
will be sufficient to pay product liability claims brought against the Company. A partially or
completely uninsured claim, if successful and of significant magnitude, could have a material
adverse effect on the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Employees</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On December&nbsp;31, 2010, Milestone had a total of 16 employees, consisting of two executive
officers, a director of International and Professional Relations, a director of engineering, a
domestic sales manager, an international sales manager, five sales representatives (field and
internal), two customer service representatives, a staff accountant, a bookkeeper and an
administrative manager. Milestone also has a full time consultant who serves as a Director of
Clinical Affairs.
</DIV>
<DIV align="left">
<A name="C14776103"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;1A.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>CERTAIN RIS</B>K <B>FACTORS THAT MAY AFFECT GROWTH AND PROFITABILITY</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following factors may affect the growth and profitability of Milestone and should be
considered by any prospective purchaser or current holder of Milestone&#146;s securities:
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Milestone has no history of profitable operations. Continuing losses could exhaust capital
resources and force us to discontinue operations.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For the years ended December&nbsp;31, 2010 and 2009, revenues were approximately $9.7&nbsp;million and
$8.5&nbsp;million, respectively. In addition, Milestone has had losses for each year since the
commencement of operations, including net losses of approximately $615,000 and $1.5&nbsp;million for
2010 and 2009, respectively. At December&nbsp;31, 2010, Milestone had an accumulated deficit of
approximately $59.4&nbsp;million. At December&nbsp;31, 2010, the Company had cash and cash equivalents
$627,082 and a negative working capital of $6,685. The working capital decrease is due to the
Company&#146;s ramp up of purchasing of parts in anticipation of significant sales to our distributor in
China. Such sales have been delayed<U>.</U> The significant working capital decrease of $1,632,758
in 2010 (negative working capital of $6,685) as compared to 2009 (positive working capital of
$1,626,073) is due to the delay in obtaining regulatory approval to sell our instruments and
handpieces in China. Obtaining such regulatory approval was not a condition of the purchase order
and sale with the distributor in China. As a result of this delay, the advance to the contract
manufacturer has been allocated between current and long term. Additionally, the accounts payable
due to suppliers has also been allocated between long term and short term. And finally, the
accounts receivable for the China distributor has been allocated between current and long term,
with a reserve of $636,000 provided against the accounts receivable. Additionally, in 2009, the
Company converted the $1.3&nbsp;million Line of Credit into 822,785 shares of common stock at a
conversion price of $1.58 per share. The company is actively pursuing the generation of positive
cash flows from operating activities through increases in revenues based upon management&#146;s
assessment of present contracts and current negotiations and reductions in operating expenses.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of December&nbsp;31, 2010, the Company believes that it does not have sufficient cash reserves
to meet all of its anticipated obligations for the next twelve months. If the Company requires a
need for a higher level of marketing and sales effort, or if the Company is unable to generate
positive cash flows from its operating activities, it will need to raise additional capital. There
is no assurance that the Company will be able to achieve positive operating cash flows or that
additional capital can be raised on the terms and conditions satisfactory to the Company, if at
all. If additional capital is required and it cannot be raised, then the Company would be forced to
curtail its development activities, reduce marketing expenses for existing dental products or adopt
other cost savings measures, any of which might negatively affect the Company&#146;s operating results.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company&#146;s recurring losses raise substantial doubt about its ability to continue as a
going concern.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Milestone cannot become successful unless it gains greater market acceptance for its products and
technology.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As with any new technology, there is substantial risk that the marketplace will not accept the
potential benefits of this technology or be unwilling to pay for any cost differential with the
existing technologies. Market acceptance of <I>CompuDent</I>, <I>STA Instrument</I>, the <I>SafetyWand</I>, <I>CompuMed </I>and
<I>CompuFlo </I>depends, in large part, upon the ability to educate potential customers of the product&#146;s
distinctive characteristics and benefits and will require substantial marketing efforts and
expense. More than 33,000 instruments of the <I>STA Instrument </I>and its predecessors have been sold
worldwide since 1998. Since being introduced to market in February&nbsp;2007, more than 6,300
instruments of the <I>STA Instrument </I>have been sold. Milestone cannot assure that its current or
proposed products will be accepted by practitioners or that any of the current or proposed products
will be able to compete effectively against current and alternative products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>The Company&#146;s limited distribution channels must be expanded in order to become successful.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Future revenues depend on the Company&#146;s ability to market and distribute its
computer-controlled injection products successfully. In the U.S., Milestone hired in July&nbsp;2010 a
Domestic Sales Director to spur our growth trend in the USA and Canada. The US and Canadian market
rely on several independent dental distributors, and a team of clinical product specialists
comprised of independent dental hygienists who help to educate, train and sell our products to
dental practitioners and group dental practices in key U.S. markets. Abroad, Milestone lacked
appropriate distribution in many markets. In April&nbsp;2010, the company hired an International Sales
Director to improve sales effort outside the USA.To be successful, the Company will need to engage
additional distributors, provide for their proper training and ensure adequate customer support. In
the spring of 2009, the Company signed an Exclusive Distribution and Marketing Agreement with China
National Medicines Corporation, dba Sinopharm, which is China&#146;s largest domestic manufacturer,
distributor and marketer of pharmaceuticals and importer of medical devices and the country&#146;s
largest domestic distributor of dental anesthetic carpules to the Chinese dental industry. Prior
to the end of 2009, China National Medicines issued Milestone a blanket purchase order for 12,000
STA units and related handpieces to be delivered over 36&nbsp;months, thereby marking the Company&#146;s
initial penetration into China&#146;s emerging dental market. Milestone cannot assure that it will be
able to hire and retain an adequate sales force or engage suitable distributors, or that the sales
force or distributors will be able to successfully market and sell the products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of March&nbsp;30, 2011, China National Medicine has not received the appropriate registration
approval from the regulatory body in China, therefore, shipment of STA instruments and handpieces
have been suspended pending the approval to sell and distribute these products in China. It is
expected that the approval by the appropriate Chinese regulatory body will be received in 2011.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Milestone depends on three principal manufacturers. If the Company cannot maintain its existing
relationships or develop new ones, it may have to cease operations</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone has informal arrangements with the manufacturer of the <I>STA Instrument</I>, <I>CompuDent </I>and
<I>CompuMed </I>instruments and with one of the principal manufacturers of the handpieces, for those
items, respectively. Pursuant to the informal arrangements, they manufacture these products under
specific purchase orders without minimum purchase commitment. However, in November&nbsp;2009, the
Company issued a purchase order to Tricor Corporation to manufacture 12,000 <I>STA Instruments, </I>over
the next three years. In 2010, 1,000 <I>STA Instrument </I>were purchased and shipped against this
purchase order. Milestone has a manufacturing agreement with one of the principal manufacturers of
its handpieces pursuant to which they manufacture products under specific purchase orders but
without minimum purchase commitments. Milestone has been supplied by the manufacturer of the <I>STA
Instrument, CompuDent </I>and <I>CompuMed </I>since the commencement of production in 1998, one of the
manufacturers of its handpieces since 2002 and the other manufacturer of handpieces since 2003.
However, termination of the manufacturing relationship with any of these manufacturers could
significantly and adversely affect the ability to produce and sell the products. Though Milestone
has established an alternate source of supply for the handpieces in China and other alternate
sources of supply exist, Milestone would need to recover its existing tools or have new tools
produced to establish relationships with new suppliers. Establishing new manufacturing
relationships could involve significant expense and delay. Any curtailment or interruptions of the
supply, whether or not as a result or termination of the relationship, would have an adverse
affect.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Milestone may be subject to product liability claims that are not fully covered by insurance and
that could put the Company under financial strain.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone could be subject to claims for personal injury from the alleged malfunction or
misuse of the dental and medical products. While Milestone carries liability insurance that is
believed to be adequate, the Company cannot assure that the insurance coverage will be sufficient
to pay such claims should they be successful. A partially or completely uninsured claim, if
successful and of significant magnitude, could have a material adverse effect on the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Milestone relies on the continuing services of the Chief Executive Officer and Director of Clinical
Affairs.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone depends on the personal efforts and abilities of the Chief Executive Officer and the
Director of Clinical Affairs. Milestone maintains a key man life insurance policy in the amount of
$1,000,000 on the life of the Chief Executive Officer. However, the loss of his services or
Director of Clinical Affairs, on whom Milestone maintains no insurance, could have a materially
adverse effect on the business.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>The market price of Milestone&#146;s common stock has been volatile and may continue to fluctuate
significantly because of various factors, some of which are beyond the Company&#146;s control.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone&#146;s stock price has been extremely volatile, fluctuating over the last two years
between closing prices of $.25 and $1.85. The market price of common shares could continue to
fluctuate significantly in response to a variety of factors, some of which may be beyond the
Company&#146;s control.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Milestone is controlled by a limited number of shareholders.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone&#146;s principal shareholders, Leonard Osser and K. Tucker Andersen, beneficially own
28.8% of the issued and outstanding shares of common stock. As a result, they have the ability to
exercise substantial control over the Company&#146;s affairs and corporate actions requiring shareholder
approval, including electing directors, selling all or substantially all of the assets, merging
with another entity or amending its certificate of incorporation. This de facto control could
delay, deter or prevent a change in control and could adversely affect the price that investors
might be willing to pay in the future for the Company&#146;s securities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Future sales or the potential for sale of a substantial number of shares of Milestone&#146;s common
stock could cause the trading price of common stock and warrants to decline and could impair the
Company&#146;s ability to raise capital through subsequent equity offerings.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Sales of a substantial number of shares of Milestone&#146;s common stock in the public markets, or
the perception that these sales may occur, could cause the market price of the stock to decline and
could materially impair its ability to raise capital through the sale of additional equity
securities. At December&nbsp;31, 2010, Milestone had outstanding options and warrants to purchase
1,538,502 shares of common stock at prices ranging from $0.32 to $5.00 per share with a weighted
average exercise price of $1.40. Holders of these warrants and options are given the opportunity to
profit from a rise in the market price of the common stock and are likely to exercise their
securities at a time when the Company would be able to obtain additional equity capital on more
favorable terms. Thus, the terms
upon which the Company will be able to obtain additional equity capital may be adversely
affected, since the holders of outstanding options and warrants can be expected to exercise them at
a time when Milestone would, in all likelihood, be able to obtain any needed capital on terms more
favorable than the exercise terms provided by such outstanding securities. The market price of the
common shares has been volatile and may continue to fluctuate significantly because of various
factors, some of which are beyond the Company&#146;s control.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In the first and second quarters of 2009, 2,227,946 warrants to issue the equivalent number of
shares of the Company&#146;s common stock at an exercise price of $4.89 expired.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Implementation of procedures to comply with the Sarbanes-Oxley Act and SEC rules concerning
internal controls may be so costly that compliance could have an adverse effect on the Company.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Management of the Company has assessed the effectiveness of internal control over
financial reporting as of December&nbsp;31, 2010. In making this assessment, management used the
criteria established in <I>Internal Control-Integrated Framework </I>issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company complied with Sarbanes-Oxley
requirements to include in the annual report a management report on the effectiveness of the
internal control over financial reporting. In 2005, Milestone hired an outside consultant to
assist with the development and implementation of the necessary internal controls and reporting
procedures. In 2010 and 2009, the Company utilized the outside consultant on a quarterly basis to
review compliance with the internal controls over financial reporting. This expense amounted to
$15,200 and $37,773 in 2010 and 2009, respectively and the cost is expected to continue in 2011.
</DIV>
<DIV align="left">
<A name="C14776104"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;1B.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Unresolved Staff Comments</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">None
</DIV>
<DIV align="left">
<A name="C14776105"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;2.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Description of Property</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The headquarters for the Company is located at 220 South Orange Ave, Livingston, New Jersey.
The Company leases approximately 6,300 square feet of office space at 220 South Orange Avenue in
Livingston, New Jersey. The lease term expires June&nbsp;30, 2014 at a monthly cost of $6,942 which
Milestone believes to be competitive. Additionally, Milestone leases a corporate apartment in
Maplewood, NJ. This lease expired in November&nbsp;2010, but the company continues to lease the
corporate apartment on a month to month basis. The leased offices space is in good condition. A
third party distribution and logistics center in Pennsylvania handles shipping and order
fulfillment on a month-to-month basis.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone does not own or intend to invest in any real property. Milestone currently has no
policy with respect to investments or interests in real estate, real estate mortgages or securities
of, or interests in, persons primarily engaged in real estate activities.
</DIV>
<DIV align="left">
<A name="C14776106"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;3.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Legal Proceedings</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">At the present time, the Company is not involved in any significant litigation.
</DIV>
<DIV align="left">
<A name="C14776107"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;4.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>(Removed and Reserved)</B></DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">



<DIV align="left">
<A name="C14776108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART II</B>
</DIV>

<DIV align="left">
<A name="C14776109"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;5.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Market Information</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone&#146;s Common Stock was traded on the OTC Bulletin Board (&#147;OTCBB&#148;) under the symbol
&#147;MLSS&#148; until Feb 2011. In mid February&nbsp;2011, Milestone&#146;s Common Stock began trading on the OTC Pink
Board (OTCQB), under the symbol &#147;MLSS&#148;. Milestone&#146;s warrants were traded on the OTCBB under the
symbol &#147;MLSSW&#148; until February&nbsp;2009, when the warrants expired. The quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Common Stock</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table sets forth the high and low sales prices of the Common Stock, as quoted by
the OTCBB
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">HIGH</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">LOW</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>2010</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>2009</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.83</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Holders</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">According to the records of the transfer agent, there were approximately 71 and 67
shareholders of record of the common stock as of December&nbsp;31,
2010 and 2009, respectively. However, the Company
believes that there are approximately 2,000 and 2,500 beneficial owners of the Company&#146;s common
stock at December&nbsp;31, 2010 and 2009, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Dividends</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The holders of the Common Stock are entitled to receive such dividends as may be declared by
Milestone&#146;s Board of Directors. Milestone has not paid and does not expect to declare or pay any
dividends in the foreseeable future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For information regarding securities authorized under the equity compensation plan, see
Item&nbsp;12.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Sales of Unregistered Securities</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">See NOTE J &#151; STOCKHOLDERS&#146; EQUITY, to the financial statements for the issuance of
unregistered securities.
</DIV>
<DIV align="left">
<A name="C14776110"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 6.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Selected Financial Data</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone is a &#147;smaller reporting company&#148; as defined by Regulations S-K and as such, is not
providing the information contained in this item pursuant to Regulation&nbsp;S-K.
</DIV>
<DIV align="left">
<A name="C14776111"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 7.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Management&#146;s Discussion and Analysis of Financial condition and Results of Operations.</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following discussions of the financial condition and results of operations should be read
in conjunction with the financial statements and the notes to those statements included elsewhere
in this annual report. Certain statements in this discussion and elsewhere in this report
constitute forward-looking statements, within the meaning of section 21E of the Exchange Act, that
involve risks and uncertainties. The actual results may differ materially from those anticipated in
these forward-looking statements. See &#147;Certain Risk Factors&#148; on page 11 of this Form 10-K.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>OVERVIEW</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone remains focused on advancing efforts to achieve our two primary objectives; those
being:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Optimizing our tactical approach to product sales and marketing in
order to materially increase penetration of the global dental and
medical markets with our proprietary, patented Computer-Controlled
Local Anesthesia Delivery (C-CLAD) solution, the <I>STA Single Tooth
Anesthesia Instrument </I>(<I>STA Instrument</I>); and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Identifying and pursing strategic collaborations with third parties to
jointly develop new products utilizing our patented <I>CompuFlo </I>pressure
force technology for novel new medical applications.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>STA Instrument Awards &#151; Industry Recognition</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Since its market introduction in the spring of 2007, the <I>STA Instrument </I>has received favorable
reviews and awards from the dental industry. In July&nbsp;2007, noted industry publication <I>Dentistry
Today </I>featured the <I>STA Instrument </I>as one of the &#147;Top 100 Products in 2007,&#148; helping to promote much
broader recognition of the instrument and validating the <I>STA Instrument&#146;</I>s value proposition for
dentists and patients alike. In April&nbsp;2008, <I>Medical Device &#038; Diagnostic Industry </I>magazine
distinguished the <I>STA Instrument </I>as a 2008 Medical Design Excellence Award winner in the &#147;Dental
Instruments, Equipment and Supplies&#148; product category. Of the 33 products to receive this coveted
award, the <I>STA Instrument </I>was one of only two winning products that serve dental practitioners.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2008, the <I>STA Instrument </I>was again recognized as one of the dental industry&#146;s best
technological innovations, winning a &#147;Townie Choice Award&#148; from <I>Dentaltown Magazine </I>in the category
&#147;Anesthetics: Technique Instrument&#148;. This marked the second consecutive year that Milestone won a
&#147;Townie Choice Award&#148;; in 2007, we won the same award for our <I>CompuDent/The Wand. </I>Also in December
2008, our <I>STA Instrument </I>was named as a <I>Dental Products Report </I>&#147;Top 100 2008 Product of
Distinction&#148;. Each year, <I>DPR </I>spotlights the year&#146;s Top 100 products. Of these 100 products, 50 are
the ones most often inquired about by <I>DPR&#146;</I>s readers via an online and Product Information Card
reader service program. The other 50 represent &#147;New Classics,&#148; which recognize both old and newer
products and categories chosen by <I>DPR&#146;s </I>editorial staff for their &#147;perceived impact on driving
innovation or helping to establish a new, higher standard of care for patients.&#148; The <I>STA Instrument</I>
was recognized as a &#147;New Classic&#148; in the Technology category.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In July&nbsp;2010, the <I>STA Instrument </I>was recognized as one of &#147;Dentistry Today&#146;s&#148;, Top 100
Products, for the third consecutive year. This honor is significant because it is unprecedented in
Milestone&#146;s history and serves to support our objective of establishing our instrument as the new
global standard of care for painless dental injections.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Second Annual Symposium on C-CLAD</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On May 1 through 3, 2009, we hosted the Second International Annual Symposium on C-CLAD in
Amelia Island, Florida. Stanley Malamed, DDS, Professor of Anesthesia &#038; Medicine at the University
of Southern California, School of Dentistry, again served as Chairman of the invitational event.
With attendance triple that of 2008, the Second Symposium covered a broad range of C-CLAD related
topics including:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The History of C-CLAD</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Treating with Connection</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Heart Rate Study</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>STA </I>Compassionate Care in the 21<SUP style="FONT-size: 85%; vertical-align: text-top">st</SUP> Century</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Injection Advances and Challenges</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Physiologic and Clinical Characteristics of PDL Anesthesia Delivered
by a High Pressure Hand piece and a Computerized Device</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The <I>STA </I>for Tots and Teens</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Computerized Local Anesthesia in Dentistry: A Review</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Today&#146;s Technology</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Managing a Successful Dental Practice: Why People Keep Coming Back</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>STA </I>&#151; The Dental School&#146;s Perspective</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Futuristic Vistas: The Dentist/Hygienist Partnership</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2010, the company published and broadly distributed more than 100,000 copies of a
comprehensive monograph reflecting the topics discussed at the Symposium and a consensus on the
attendees&#146; attitudes, ideas and suggestions relating to promoting global industry adoption of
C-CLAD technologies as the new standard of care for administering dental injections.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>STA Instrument Growth</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Since its market introduction in early 2007, the <I>STA Instrument </I>and a prior computerized
controlled local anesthesia delivery product<I>, </I>have been used to deliver over 44&nbsp;million of safe,
effective and comfortable injections. The instrument has also been favorably evaluated in numerous
peer-reviewed, published clinical studies and associated articles. Moreover, there appears to be a
growing consensus among users that the <I>STA Instrument </I>is proving to be a valuable and beneficial
instrument that is positively impacting the practice of dentistry worldwide. The utility and value
of the <I>STA Instrument </I>is perhaps best summarized by Dr.&nbsp;Joe Blaes, who wrote in the December&nbsp;2008
edition of <I>Dental Economics</I>, &#147;I tried the <I>STA Instrument </I>and my patients absolutely love it. This
is a no brainer &#151; go get one ASAP!&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Global Distribution Network</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><U><B>North America Market </B></U>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The <I>STA Instrument </I>and related hand pieces are marketed to the dental industry in the United
States and Canada by many of the nation&#146;s leading dental supply companies, including Henry Schein,
Inc., Patterson Dental Supply, Atlanta Dental, Benco Dental, Burkhart Dental, Cedar Dental, Darby
Dental Supply, Dental Health Products, Goetze Dental, Iowa Dental, Nashville Dental, Newark Dental
and Parkway Dental. In Canada, our independent distributors include Dental 2000, Mediclub, and
Specialty Dental.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Collectively, our domestic network has more than 4,000 independent sales representatives
trained to sell the <I>STA Instrument </I>and related handpieces to dentists throughout North America.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In the third quarter of 2010, the company added a Domestic Sales Director to refocus our
attention on the USA and Canadian markets. The mission of the Domestic Sales Director is to grow
our business through marketing our STA Instrument to Dental Group Practices, as well as individual
dental practitioners. Through direct marketing to the Dental Group Practices and utilizing a group
of independent hygienists, the instrument and handpiece sales should increase substantially in the
future. The Company closed its&#146; first Group Dental Practice in January&nbsp;2011, Towncare Dental.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><U><B>International Market </B></U>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On the global front, we also have granted exclusive marketing and distribution rights for the
<I>STA Instrument </I>to select dental suppliers in various international regions in Asia, Africa, South
America and Europe. They include Istrodent in South Africa and Unident in the Scandinavian
countries of Denmark, Sweden, Norway and Iceland.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In April&nbsp;2009, we signed an Exclusive Distribution and Marketing Agreement with China National
Medicines Corporation, d/b/a Sinopharm, which is China&#146;s largest domestic manufacturer, distributor
and marketer of pharmaceuticals and importer of medical devices and the country&#146;s largest domestic
distributor of dental anesthetic carpules to the Chinese dental industry. Prior to the end of
2009, China National Medicines issued Milestone a blanket purchase order for 12,000 <I>STA </I>instruments
to be delivered over 36&nbsp;months, thereby marking the Company&#146;s initial penetration into China&#146;s
emerging dental market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of March&nbsp;30, 2011, China National Medicine has not received the appropriate registration
approval from the regulatory body in China, therefore, shipment of STA instruments and handpieces
have been suspended pending the approval to sell and distribute these products in China. It is
expected that the approval by the appropriate Chinese regulatory body will be received in 2011.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">According to a report published by the U.S. Department of Commerce, titled &#147;China&#146;s Emerging
Markets: Opportunities in the Dental and Dental Lab Industry,&#148; China&#146;s dental market lags behind
other healthcare services and has largely been neglected in the past. In fact, CS Market Research
reports that &#147;of China&#146;s 1.3&nbsp;billion plus population, 50% of the adults and 70% of the children are
estimated to have decayed tooth problems, and over 90% have periodontal disease.&#148; However, with
increasing affluence of the Chinese population, as well as increasing attention towards personal
care, demand for dental services has been growing. Market research firm Freedonia agrees, noting
that demand for dental products in China is expected to climb to 21.5&nbsp;billion RMB (US$3.15&nbsp;billion)
by 2012, due primarily to escalating personal income levels and government programs promoting
awareness of the benefits of good oral care.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Shortly before the end of the second quarter 2009, we announced that we were refining our
international marketing strategy to gain greater access to and penetration of the international
dental markets for the <I>STA Instrument, CompuDent </I>and related disposable
hand pieces. The new sales strategy provides for increasing hands-on oversight and support of
our existing international distribution network, while also attracting new distributors throughout
Europe, Asia and South America. To assist in this endeavor, Milestone added in the spring of 2010
an International Sales Director to focus on growth of our products outside the USA and Canada. The
new addition to the company&#146;s staff has proven to be a positive improvement to our sales and
marketing effort outside the USA and Canada.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table shows a breakdown of Milestone&#146;s product sales (net), domestically and
internationally, by product category, and the percentage of product sales (net)&nbsp;by each product
category:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Twelve Months Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>DOMESTIC</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><I>Instruments</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,236,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">27.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,786,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Handpieces</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,216,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">71.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,507,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">65.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,529,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,378,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>INTERNATIONAL</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><I>Instruments</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,453,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,390,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">43.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Handpieces</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,746,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">52.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,769,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">55.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,220,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,170,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>DOMESTIC/INTERNATIONAL ANALYSIS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,529,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">46.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,378,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">62.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,220,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">53.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,170,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">37.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Product Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,749,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,549,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company earned gross profits of 64% and 60% in the years ended December&nbsp;31, 2010 and
2009, respectively. However, the revenues and related gross profits have not been sufficient to
support overhead, new product introduction and research and development expenses. Although the
Company anticipates expending funds for research and development in 2011, these amounts will vary
based on the operating results for each quarter. The Company has incurred operating losses and
negative cash flows from operating activities since its inception, except for 2009. The Company at
December&nbsp;31, 2010 believes that it does not have sufficient cash reserves to meet all of its
anticipated obligations for the next twelve months. The Company is actively pursuing the generation
of positive cash flows from operating activities through increase in revenue, assessment of current
contracts and current negotiations. There is no assurance that the company will be able to achieve
positive operating cash flows or that additional capital raised on terms and conditions
satisfactory to the company, if at all. If additional capital is required and it cannot be raised,
then the Company would be forced to curtail its development activities, reduce marketing for
existing dental products or adopt other cost saving measures, any of which might negatively affect
the Company&#146;s operating results.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2011, the Company plans to further support increased sales and marketing activity through
trade show appearances, utilization of independent hygienists&#146; making sales calls and training
individual practitioners and group practices domestically, refined and directed advertising to
dental professionals, and support and broaden our global distribution network.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In January&nbsp;2011, the Company signed an agreement with its first group dental practice Towncare
Dental Partnership for deployment of our <I>STA Instrument. </I>The <I>STA Instrument </I>will replace the
syringe in this practice.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Current Product Platform</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone has developed and in some cases brought to market a highly differentiated portfolio
of industry innovations. Specifically, Milestone&#146;s proprietary solutions for application in
professional dentistry and a wide range of medical applications include:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>STA Single Tooth Anesthesia Instrument</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I>&#153;</I></SUP><I> (STA Instrument) </I>&#151; In February of
2007, Milestone introduced to market the <I>STA Instrument</I>, a patented C-CLAD instrument that
incorporates the &#147;pressure force feedback&#148; elements of Milestone&#146;s patented <I>CompuFlo</I>
technology, thereby allowing dentists to administer injections accurately and painlessly
into the periodontal ligament space, effectively anesthetizing a single tooth. The <I>STA
Instrument </I>is also capable of performing all of the injections that can be done with a
conventional dental syringe, including the palatal-anterior superior alveolar, anterior
middle superior alveolar and inferior alveolar nerve block. The <I>STA Instrument </I>achieves all
of these injections predictably and reliably including the Periodontal-Intraligamentary
injection (Single Tooth Anesthesia) that provides an almost immediate onset of profound
anesthesia to a single tooth. Milestone received FDA 510(k) Pre-market Notification
acceptance in August&nbsp;2006 and was granted a CE Mark by European regulatory authorities in
June&nbsp;2007.</DIV></TD>
</TR>

</TABLE>
</DIV><P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">



<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The <I>STA Instrument </I>has been the subject of numerous articles published in leading trade
magazines, dental journals and online blogging sites since its market introduction early in
2007. Since its market introduction in the spring of 2007, the <I>STA Instrument </I>has received
positive reviews and awards from the dental industry. In July&nbsp;2007, noted industry
publication <I>Dentistry Today </I>featured the <I>STA Instrument </I>as one of the &#147;Top 100 Products in
2007,&#148; helping to promote much broader recognition of the instrument and validating <I>STA</I>&#146;s
value proposition for dentists and patients, alike. Earlier this year, <I>Medical Device &#038;
Diagnostic Industry </I>magazine distinguished the <I>STA Instrument </I>as a 2008 Medical Design
Excellence Award winner in the &#147;Dental Instruments, Equipment and Supplies&#148; product category.
Of the 33 products to receive this coveted award, the <I>STA </I>was one of only two winning
products that serve dental practitioners. In December&nbsp;2009, the STA Instrument was again
recognized as one of the dental industry&#146;s best technological innovations, winning a &#147;Townie
Choice Award&#148; from Dentaltown Magazine in the category &#147;Anesthetics: Technique Instrument&#148;.
This marked the second consecutive year in a row that Milestone won a &#147;Townie Choice Award&#148;
 &#151; in 2007, the Company won the same award for its CompuDent/The Wand. Also in December
2008, Milestone&#146;s STA Instrument was named as a <I>Dental Products Report </I>&#147;Top 100 2008 Product
of Distinction. Each year, <I>DPR </I>spotlights the year&#146;s Top 100 products. Of these 100
products, 50 are the ones most often inquired about by <I>DPR</I>&#146;s readers via an online and
Product Information Card reader service program. The other 50 represent &#147;New Classics,&#148;
which recognize both old and newer products and categories chosen by <I>DPR</I>&#146;s editorial team for
their &#147;perceived impact on driving innovation or helping to establish a new, higher standard
of care for patients.&#148; The <I>STA Instrument </I>was recognized as a &#147;New Classic&#148; in the
Technology category.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>CompuDent</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> </I></SUP>&#151; <I>CompuDent </I>was distinguished by <I>Dentaltown Magazine </I>as the
winner of a &#147;2006 Townie Choice Award&#148;, <I>CompuDent </I>is Milestone&#146;s proprietary, patented
computer-controlled local anesthetic delivery instrument which delivers anesthesia at a
precise and consistent rate below a patient&#146;s pain threshold. <I>CompuDent </I>has been widely
heralded as a revolutionary device, considered one of the major advances in dentistry of
the Twentieth Century and favorably evaluated in approximately 50 peer reviewed or
independent clinical research reports. <I>CompuDent </I>is the predecessor device to the <I>STA
Instrument</I>.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>CompuMed</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> </I></SUP>&#151; <I>CompuMed </I>is a patented computer-controlled injection instrument
geared to the needs of the medical market and providing benefits similar to <I>CompuDent.
CompuMed </I>allows many medical procedures, now requiring intravenous sedation, to be
performed with only local anesthesia due to dramatic pain reduction. Also, dosages
of local anesthetic can often be significantly reduced, thus reducing side effects,
accelerating recovery times, lowering costs and eliminating potential complications.
<I>CompuMed </I>is now gaining growing clinical evidence demonstrating benefits from use in
colorectal surgery; podiatry; dermatology, including surgery for the removal of basal cell
carcinomas and other oncological dermatologic procedures; nasal and sinus surgery,
including rhinoplasty; hair transplantation and plastic surgery, among others.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>The Wand</I><SUP style="FONT-size: 85%; vertical-align: text-top"><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>&#151; Used in conjunction with the <I>STA</I>, <I>CompuDent </I>or <I>CompuMed</I>
instruments, <I>The Wand </I>is an ergonomically designed and patented handpiece that enables all
traditional and newer injections, such as AMSA, P-ASA and Modified-PDL, to be more
comfortable and easier to deliver. Moreover, the pen-like grasp of <I>The Wand </I>allows
bi-directional rotation during injection, which prevents needle deflection that can occur
with a traditional syringe. A straighter path results in a more accurate injection, meaning
fewer missed blocks, and more rapid onset of anesthesia.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>The SafetyWand</I><SUP style="FONT-size: 85%; vertical-align: text-top"><I><SUP style="FONT-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP> &#151; <I>The Safety Wand </I>was the first, patented safety-engineered
injection device that conforms to standards while also meeting the clinical needs of dental
and medical practitioners. The Federal Needlestick Prevention Act (U.S.) has mandated the
use of products with &#147;engineered safety injury protection&#148; to eliminate accidental needle
sticks, thus providing Milestone with an invaluable marketing platform to position <I>The
SafetyWand </I>as a powerful and capable alternative to traditional injection devices. <I>The
SafetyWand </I>was the first patented injection device to be fully compliant with OSHA
regulations under the Act.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2009, Milestone announced that it signed an Agreement of Intent with China
National Medicines Corporation, Ltd. and Yichang Humanwell Pharmaceutical Co. Ltd., both
incorporated in the People&#146;s Republic of China (PRC), to develop intra-articular and
epidural drug delivery instruments utilizing Milestone&#146;s patented <I>CompuFlo </I>technology. Milestone
and its two PRC joint venture partners will establish a new joint venture entity for this purpose
in 2010. The required initial funding for the new entity, estimated by the parties at $1.4
million, will be provided by the two PRC companies, although Milestone will determine the proposed
uses of their contribution. The Company believes that this new joint venture represents a
significant step forward in Milestone&#146;s efforts to have its innovative computer-controlled drug
delivery technology adapted for medical usage worldwide. As of March&nbsp;30, 2011, the agreement has
not been finalized.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>Technology Rights</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The technology underlying the <I>SafetyWand </I>and <I>CompuFlo </I>technology and an improvement to the
controls for <I>CompuDent </I>were developed by the Director of Clinical Affairs and assigned to
Milestone. The Company purchased this technology pursuant to an agreement dated January&nbsp;1, 2005,
for 43,424 shares of restricted common stock and $145,000 in cash, paid on April&nbsp;1, 2005. In
addition, the Director of Clinical Affairs will receive additional deferred contingent payments of
2.5% of the total sales of products using some of these technologies, and 5% of the total sales of
products using some of the other technologies. If products produced by third parties use any of
these technologies, under a license from Milestone, then he will also receive the corresponding
percentage of the consideration received by us for such sale or license.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>Summary of Critical Accounting Policies and Significant Judgments and Estimates</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone&#146;s discussion and analysis of the financial condition and results of operations are
based upon its financial statements, which have been prepared in accordance with accounting
principles, generally accepted in the U.S. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going
basis, the Company evaluates its estimates, including those related to accounts receivable,
inventories, stock-based compensation and contingencies. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from those estimates under different assumptions or conditions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">While significant accounting policies are more fully described in Note B to the financial
statements included elsewhere in this report, the Company believes that the following accounting
policies and significant judgments and estimates are most critical in understanding and evaluating
the reported financial results.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Accounts Receivable</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The realization of Accounts Receivable current and long-term will have a significant impact on
the Company. Consequently, Milestone estimates losses resulting from the inability of its customers
to make payments for amounts billed. The collectability of outstanding amounts is continually
assessed.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Inventories</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Inventory costing, obsolescence and physical control are significant to the on-going operation
of the business. Inventories principally consist of finished goods and component parts stated at
the lower of cost (first-in, first-out method) or market. Inventory quantities on hand are reviewed
on a quarterly basis and a provision for excess and obsolete inventory is recorded if required
based on past and expected future sales.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Impairment of Long-Lived Assets</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The long lived assets of the Company, principally patents and trademarks are the base features
of the business. Milestone reviews long-lived assets for impairment whenever circumstances and
situations change such that there is an indication that the carrying amounts may not be
recoverable. The carrying value of the asset is evaluated in relation to the operating performance
and future undiscounted cash flows of the underlying assets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Revenue Recognition</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Revenue from product sales is recognized net of discounts and allowances to domestic
distributor on the date of shipment for essentially all shipments, since the shipment terms are FOB
warehouse. The company will recognize revenue on date of arrival of the goods at the customer&#146;s
location where shipments are FOB destination. Shipments to international distributors are FOB the
warehouse and revenue is therefore recognized on shipment. In both cases the price to the buyer is
fixed and the collectability is reasonably assured. Further, the Company has no obligation on these
sales for any post installation, set-up or maintenance, these being the responsibility of the
buyer. Customer acceptance is considered made at delivery. Milestone&#146;s only obligation after sale
is the normal commercial warranty against manufacturing defects if the alleged defective unit is
returned within the warranty period.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>Results of Operations</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table sets forth for the consolidated results of operations for the year ended
December&nbsp;31, 2010 compared to 2009 as a percentage of revenues. The trends suggested by this table
may not be indicative of future operating results:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Twelve Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,749,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,549,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of products sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,531,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">36</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,458,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross Profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,218,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">64</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,090,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">60</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,648,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">68</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,952,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">81</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,919,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">71</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,194,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">84</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(700,837</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,103,513</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-25</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(614,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,530,085</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">-18</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Year ended December&nbsp;31, 2010 compared to year ended December&nbsp;31, 2009</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Total revenues for the twelve months ended December&nbsp;31, 2010 and 2009 were $9,749,968 and
$8,549,060, respectively. The total increase in product sales of $1,200,908, or 14%, is a direct
result of our shipment of <I>STA Instruments </I>and handpieces to a Chinese distributor in June&nbsp;2010. The
decrease in sales volume of domestic instruments by $549,918, or 31% in 2010 over 2009, was
directly related to the reduction in both advertising expenditures and a reduced sales force in
2010 as compared to 2009, as management implemented a new sales and training strategy focused on
concentrated geographical sales efforts and support (deploying independent hygienist) for all
customers. In the domestic market, the <I>STA </I>handpiece sales decrease was minimal. <I>CompuDent</I>
handpiece sales decreased by $291,968 or 10%. The <I>CompuDent </I>handpiece sales decrease in the
domestic market is not specifically attributable to any marketing or sales deemphasizing of the
product category. Rather it maybe attributable to our customers purchasing handpieces on a just in
time basis, due the general economic conditions. On the international scene, instrument sales
increased in 2010 over 2009 by $1,063,622, or 77%, principally due to the increase in <I>STA</I>
instruments $1,007,820 while <I>CompuDent </I>units also measured an increase of $55,802. <I>STA </I>instrument
sales to China represented $1,290,000 of the international sales increase. The increase in
handpiece sales internationally was $977,283 or 55% due to an increase in sales of STA handpieces
of $615,907 ($557,568 for sale to China) and an increase in sales of <I>CompuDent </I>handpieces $361,376.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Cost of products sold for the years ended December&nbsp;31, 2010 and 2009 were $3,531,452 and
$3,458,279, respectively. The $73,173 minimal increase in product cost of 2%, even with higher
sales volume, is due to a decrease in our production cost in 2010 for the <I>STA </I>Instrument<I>. </I>Slow
moving and overstocked inventories totaling approximately $36,000 were charged off to cost of
products sold during the year ended December&nbsp;31, 2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For the year ended December&nbsp;31, 2010, Milestone&#146;s gross profit dollars increased by 4% over
the prior year ended December&nbsp;31, 2009, due to significant increased sales volume and a reduction
in product cost for the <I>STA </I>instrument. Milestone generated a gross profit of $6,218,516, or 64% in
2010 as compared to a gross profit of $5,090,781, or 60% in 2009. The total dollar increase in
gross profit was $1,127,735 in 2010 over 2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Selling, general and administrative expenses for the years ended December&nbsp;31, 2010 and 2009
were $6,648,859 and $6,952,976, respectively. The $304,117, or 4.4%, net decrease was focused into
a several expense categories. Sales and Marketing expense decrease in 2010 by $649,382. This
decrease was primarily in the areas of media placement $226,561, marketing key opinion leaders and
also promotions at trade shows (national and regional), reduction in marketing consulting by
$302,429 and reduction in third party sales representative commissions of $106,219. Payroll
expenses decreased by $616,921, principally due to a reversal of a 2009 Achievement Bonus for the
Chief Executive Officer of approximately $300,000 and a reversal in stock based compensation of
approximately $198,000. Legal and patent expenses decrease by $44,613 in the aggregate due to
reduced general litigation expenses and customary patent annuity payments. General and
administrative expenses increased by $1,006,801 due to payment of an international commission of
$401,361 (effective July&nbsp;1, 2009), increased royalties of $67,272 as a result of increased sales
volume, an international travel expense increase of $59,641, directly related to our current and
future sales growth, offset by a reduction in business consulting of $125,188 and success fees for
domestic and international business of $64,800. Bad debt expense increased by $640,558, of which
$636,000 is based on the estimated net realizability of the current and long term accounts
receivable, for the STA instruments shipped to a distributor in China in June&nbsp;2010. In addition,
the Company realized expense reductions in the areas of professional accounting and audit fees of
$96,943 and reduced insurance costs of $5,511.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Research and development expenses for the years ended December&nbsp;31, 2010 and 2009 were $270,494
and $241,318, respectively. The increase of $29,176 was attributable to research on the development
of a C-CLAD device(s) for the medical field and clinical studies on the <I>STA Instrument.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The loss from operations for the years ended December&nbsp;31, 2010 and 2009 was $700,837 and
$2,103,513, respectively. The $1,402,676, or decrease in loss from operations is explained above.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Interest expense for the years ended December&nbsp;31, 2010 and 2009 was $95,135 and $154,027,
respectively and amortization of debt issuance for the same years was $2,796 and $53,300,
respectively. The interest expense is related to the Line of Credit and Long Term Note. See Note I
to the Financial Statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Other Income includes $183,673 and $777,609 in 2010 and 2009, respectively, and represents the
sale of tax credits under the New Jersey Technology Business Tax Certificate Program, for the
respective periods. The company has sold all of its applicable NJ tax losses through December&nbsp;31,
2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For the reasons explained above, net loss for the year ended December&nbsp;31, 2010 was $614,508 as
compared to a net loss of $1,530,085 for the year ended December&nbsp;31, 2009. The $915,577, or 60%,
decrease in net loss is primarily a result of a significant increase in Gross Margin dollars
($1,127,735) a decrease in Selling General and Administrative expenses of $304,117 offset by a
reduction in other income of $487,099.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of December&nbsp;31, 2010, the Company had cash and cash equivalents of $627,082 and a negative
working capital of $6,685. The significant decrease in working capital of $1,632,758 in 2010 was
caused by a delay in obtaining regulatory approval to sell our instruments and handpieces in China.
Based on the initial purchase order from our distributor in China in 2009, the Company ramped up
purchasing of parts in anticipation of significant sales in 2010 and future years. As a result of
the delay in shipping, the advances to contract manufacturer has increased significantly, (current
and long term), in 2010 as compared to 2009. Additionally, the accounts payable due to suppliers
has also increased and is classified as current and long term. And finally, the accounts receivable
from the China distributor has been classified between current and long term net of a reserve of
doubtful accounts of $636,000.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As a result of this delay on shipments to China, the decrease in working capital at December
31, 2010, of $1,632,758, consists of a net current asset decrease of $84,003. Accounts receivable
decreased by $267,521, advances to contract manufacturer increased by $578,496. Cash decreased by
$402,047, utilized in operations and to pay for parts required for the China production. Current
liabilities increased by $1,716,555, principally due to an increase in current accounts payable for
the purchase of materials to produce instruments and handpieces of $1,729,574.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company has also incurred increases in non current advances to contract manufacturer of
$1,402,564 and an increase in non current accounts payable of $440,376 as a result of the delay in
shipping instruments and handpieces to our distributor in China. The Company continues to take
positive steps to maintain adequate inventory levels and advances to contract manufacturers to
maintain available inventory to meet our domestic and international sales requirements. Milestone
incurred net losses of $614,508 and $1,530,085 for the years ended 2010 and 2009, respectively.
Cash flows from operating activities for the year ended December&nbsp;31, 2010 was a negative $293,777
and for the year ended December&nbsp;31, 2009 was a positive $402,951.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For the year ended December&nbsp;31, 2010, net cash used in operating activities was $293,777. This
was attributable primarily to a net loss of $614,508 adjusted for noncash items of $1,070,000 and
changes in operating assets and liabilities of $749,269. The decrease in noncash items in 2010 of
$636,763 as compared to 2009 is principally due to the increase in shares issued for compensation
of $773,741 in 2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For the year ended December&nbsp;31, 2010, Milestone used $108,270 in investing activities,
primarily attributable to legal fees related to payment for patent rights.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2009, the Company converted the $1.3&nbsp;million Line of Credit into 822,785 shares of
Common Stock at a price of $1.58 per share. There were no additional expenses related to the
conversion of the Line of Credit. The Company borrowed an additional $450,000 from the same
shareholder in 2008. In December&nbsp;2008, the Company refinanced the $450,000 note, extending the due
date to June&nbsp;30, 2012. The $450,000 Note is classified as a Long Term Note Payable on the Balance
Sheet at December&nbsp;31, 2009. See Note I &#151; Line of Credit to the Financial Statements.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company has incurred operating losses and negative cash flows from operating activities
since its inception, except for 2009. The Company did not achieve positive cash flow in 2010. The
Company is actively pursuing the generation of positive cash
flows from operating activities through increases in revenues based upon management&#146;s
assessment of present contracts and current negotiations and reductions in operating expenses. As
of December&nbsp;31, 2010, the Company believes that it does not have sufficient cash reserves to meet
all of its anticipated obligations for the next twelve months. However, if the Company requires a
need for a higher level of marketing and sales effort, or if the Company is unable to continue
generating positive cash flows from its operating activities it will need to raise additional
capital. There is no assurance that the Company will be able to continue to achieve positive
operating cash flows or that additional capital can be raised on the terms and conditions
satisfactory to the Company if at all. If additional capital is required and it cannot be raised,
then the Company would be forced to curtail its development activities, reduce marketing expenses
for existing dental products or adopt other cost savings measures, any of which might negatively
affect the Company&#146;s operating results.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company&#146;s recurring losses and negative operating cash flows raises substantial doubt
about its ability to continue as a going concern. The accompanying financial statements do not
include any adjustment that might result from the outcome of this uncertainty.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Off-Balance Sheet Arrangements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company does not have any off-balance sheet arrangements that are currently material or
reasonably likely to be material to the financial position or results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Contractual Obligations</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The impact of the contractual obligations at December&nbsp;31, 2010, expected on the liquidity and
cash flows in future periods, is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Payments Due by Period</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Less than</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">1 Year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">1-3 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">3-5 Years</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">450,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">450,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,653</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase obligations (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,583,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,812,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,770,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,331,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,901,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,387,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41,653</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Purchase obligations include agreements for the purchase of instruments and
handpieces.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The agreements are referred as purchase orders.</DIV></TD>
</TR>

</TABLE>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Recent Accounting Pronouncements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">See &#147;Note B &#151; Summary of Significant Accounting Policies&#148; to the financial statements for
explanation of recent accounting pronouncements impacting the Company.
</DIV>
<DIV align="left">
<A name="C14776112"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;7A.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Quantitative and Qualitative Disclosures about Market Risk</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone is a &#147;smaller reporting company&#148; as defined by Regulation&nbsp;S-K and as such, is not
required to provide the information required by this item.
</DIV>
<DIV align="left">
<A name="C14776113"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;8.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Financial Statements</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The financial statements of Milestone required by this Item are set forth beginning on page
F-1.
</DIV>
<DIV align="left">
<A name="C14776114"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;9.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Change in and Disagreements with Accountants on Accounting and Financial Disclosure</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">None.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">
<DIV align="left">
<A name="C14776115"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;9A.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Controls and Procedures</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company&#146;s management, including the Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the design and operation of the Company&#146;s disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that
evaluation, the Company&#146;s Chief Executive Officer and Chief Financial Officer have concluded that
the disclosure controls and procedures as of December&nbsp;31, 2010 are effective to ensure that
information required to be disclosed in the reports the Company files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the SEC&#146;s
rules and forms and that such information is accumulated and communicated to the Company&#146;s
management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Management&#146;s Annual Report on Internal Control Over Financial Reporting</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone management is responsible for establishing and maintaining an adequate instrument of
internal control over financial reporting. The internal control over financial reporting includes
those policies and procedures that:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the assets;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">provide reasonable assurance that transactions are recorded as
necessary to permit preparation of the financial statements in
accordance with generally accepted accounting principles in the
United States, and that the receipts and expenditures are being
made only in accordance with authorizations of the management and
directors; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
assets that could have a material effect on the financial
statements.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. All internal control
instruments, no matter how well designed, have inherent limitations. Therefore, even those
instruments determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Because of the inherent limitations of internal
control, there is a risk that material misstatements may not be prevented or detected on a timely
basis by internal control over financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is possible to design into the process
safeguards to reduce, though not eliminate, this risk.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone management assessed the effectiveness of its instrument of internal control over
financial reporting as of December&nbsp;31, 2010. In making this assessment, management used the
framework in <I>Internal Control &#151; Integrated Framework </I>issued by the Committee of Sponsoring
Organizations of the Treadway Commission (&#147;COSO&#148;). Based on the assessment and the criteria set
forth by COSO, management believes that the Company maintained effective internal control over
financial reporting as of December&nbsp;31, 2010.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There have been no changes in the Company&#146;s internal control over financial reporting
identified in connection with the evaluation that occurred during the Company&#146;s last fiscal quarter
ended December&nbsp;31, 2010 that have materially affected, or that are reasonably likely to materially
affect, the Company&#146;s internal controls over financial reporting.
</DIV>
<DIV align="left">
<A name="C14776116"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;9B.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Other Information</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">None.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">
<DIV align="left">
<A name="C14776117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART III</B>
</DIV>

<DIV align="left">
<A name="C14776118"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;10.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section&nbsp;16 (a)&nbsp;of the Exchange Act.</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone&#146;s directors are elected annually by the shareholders and serve for one-year terms
until his/her successor is elected and qualified or until such director&#146;s earlier death,
resignation or removal. The executive officers and key personnel are appointed by and serve as the
pleasure of the Board of Directors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The current executive officers and directors of Milestone and their respective ages as of
March&nbsp;30, 2011 are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>NAME</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>AGE</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>POSITION</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>DIRECTOR SINCE</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leslie Bernhard (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">67</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board and Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2003</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leonard A. Osser</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">63</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer and Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1991</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joseph D&#146;Agostino</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">59</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pablo Felipe Serna Cardenas (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">35</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2006</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leonard M. Schiller(1)(2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">69</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1997</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Member of the Audit Committee</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Member of the Compensation Committee</DIV></TD>
</TR>

</TABLE>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Key Personnel</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following are the names of individuals who are not executive officers of Milestone but are
deemed key personnel of Milestone, their respective ages and positions as of March&nbsp;30, 2011:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="41%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>NAME</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="1" style="border-bottom: 1px solid #000000"><B>AGE</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>POSITION</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Eugene Casagrande, D.D.S.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">67</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director of Professional Relations</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark Hochman, D.D.S.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director of Clinical Affairs</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Leslie Bernhard, Chairman of the Board
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In October&nbsp;2009, Leslie Bernhard assumed the position of Chairman of the Board, filing a
position left vacant by Mr.&nbsp;Osser who assumed the position of Chief Executive Officer. Leslie
Bernhard has served as an Independent Director of Milestone since May&nbsp;2003 and was named Chairman
of the Board in September of 2009. She co-founded AdStar, Inc. and since 1986 has served as its
President, Chief Executive Officer and Executive Director. AdStar is an application service
provider for the newspaper classified advertising industry. She served on the Board of Directors of
Universal Power Group (AMEX:UPG) of Dallas, Texas and have done so since 2006. Ms.&nbsp;Bernhard&#146;s
professional experience and background with AdStar and with us, as one of our directors since 2003,
have given her the expertise needed to serve as Chairman of the Board.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Leonard Osser, Chief Executive Officer
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In March of 2009, Mr.&nbsp;Osser assumed the position of Milestone&#146;s Acting Chief Executive
Officer. Mr.&nbsp;Osser in September&nbsp;2009 resigned as Chairman of the Company and assumed the position
of Chief Executive Officer. He served as the Company&#146;s Chairman from 1991 until September of 2009,
and from 1991 and 2007, was Chief Executive Officer of the Company. From 1980 until the
consummation of Milestone&#146;s public offering in November&nbsp;1995, Mr.&nbsp;Osser was primarily engaged as
the principal owner and Chief Executive Officer of U.S. Asian Consulting Group, Inc., a New
Jersey-based provider of consulting services specializing in distressed or turnaround situations in
both the public and private markets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Joseph D&#146;Agostino, Chief Financial Officer
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Joining Milestone in January&nbsp;2008 as Acting CFO, Joseph D&#146;Agostino brings to Milestone a
wealth of finance and accounting experience earned over 25&nbsp;years serving both publicly and
privately held companies. Following a nine month performance assessment by the Board of Directors,
Mr.&nbsp;D&#146;Agostino was officially named Milestone&#146;s Chief Financial Officer in October&nbsp;2008. A
results-oriented and decisive leader, he has specific proven expertise in treasury and cash
management, strategic planning, information technology, internal controls, Sarbanes-Oxley
compliance, operations and financial and tax accounting. Immediately prior to joining Milestone,
Mr.&nbsp;D&#146;Agostino served as Senior Vice President and Treasurer of Summit Global Logistics, a publicly
traded, full service international freight forwarder and customs broker with operations in the
United States and China. Previous executive posts also included Executive Vice President and CFO
of Haynes Security, Inc., a leading electronic and manned security solutions company
serving government agencies and commercial enterprises; Executive Vice President of Finance and
Administration for Casio, Inc., the U.S. subsidiary of Casio Computer Co., Ltd., a leading
manufacturer of consumer electronics with subsidiaries throughout the world; and Manager of
Accounting and Auditing for Main Hurdman&#146;s National Office in New York City (merged into KPMG). Mr.
D&#146;Agostino is a Certified Public Accountant and holds memberships in the American Institute of
CPA&#146;s, New Jersey Society of CPA&#146;s, Financial Executive Institute, Consumer Electronics Industry
Association and Homeland Security Industry Association. He is a graduate of William Paterson
University where he earned a Bachelor of Arts degree in Science.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Mark Hochman, D.D.S., Director of Clinical Affairs
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Dr.&nbsp;Hochman has served as Director of Clinical Affairs and Director of Research and
Development since 1999. He has a Doctorate of Dental Surgery with advanced training in the
specialties of Periodontics and Orthodontics from New York University of Dentistry and has been
practicing dentistry since 1984. He holds a faculty appointment as a clinical associate professor
at NYU School of Dental Surgery. Recognized as a world authority on Advanced Drug Delivery
Instruments, Dr.&nbsp;Hochman has published numerous articles in this area, and shares in the
responsibility for inventing much of the technology currently available from Milestone.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Dr.&nbsp;Eugene Casagrande, Director of International &#038; Professional Relations
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Since 1998, Dr.&nbsp;Casagrande has served as Director of International and Professional Relations,
charged with pursuing a broad range of clinical and industry-related strategic business
opportunities for the Company. He has also lectured both nationally and internationally at over 35
dental schools and in over 22 countries on Computer-Controlled Local Anesthesia Delivery. Dr.
Casagrande is past president of the California State Board of Dentistry and the Los Angeles Dental
Society and is a Fellow of the American and International Colleges of Dentists and has served on
the faculty of the University of Southern California, School of Dentistry.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Leonard M. Schiller, Director
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Mr.&nbsp;Schiller has been a director of Milestone since April&nbsp;1997. Mr.&nbsp;Schiller has been a
partner in the Chicago law firm of Schiller, Klein &#038; McElroy, P.C. since 1977. He has also been
President of The Dearborn Group, a residential property management and real estate acquisition
company since 1980. Mr.&nbsp;Schiller became a Director of the Gravitas Cayman Corporation in February
2010. Gravitas Cayman Corporation is an Investment Fund. Mr.&nbsp;Schiller&#146;s professional experience and
background as an attorney and a partner of a law firm and with us, as one of our directors since
1997, have given him the expertise needed to serve as one of our directors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Pablo Felipe Serna Cardenas, Director
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Mr.&nbsp;Serna Cardenas has been a director of Milestone since June&nbsp;2006. He is the founder of SPOT
Investments, a European-based financial services firm. Previously, from 2001 to 2005, he was a
director and Senior Manager at Dynamic Decisions Group Ltd, an equity research and valuation
consulting firm. In that capacity, Mr.&nbsp;Serna Cardenas led the corporate finance team at Dynamic
Decisions in investment banking and project valuation consulting. Prior to joining Dynamic
Decisions, from 1999-2001, Mr.&nbsp;Serna Cardenas served as an associate with Real Options Group. Real
Options Group is an international academic research center consulting to business entities. Before
joining Real Options Group, Mr.&nbsp;Serna Cardenas was the general manager with Estudios, Consultorias
y Asesorias Financieras, a Financial Consulting firm in Columbia. He has been a director of
Pairstech Fund, a UK hedge Fund since 2008. Mr.&nbsp;Cardenas&#146; professional experience and background as
an entrepreneur and as a financial consultant and with us, as one of our directors since 2006, have
given him the expertise needed to serve as one of directors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone&#146;s Board of Directors has established compensation and audit committees. The
Compensation Committee reviews and recommends to the Board of Directors the compensation and
benefits of all the officers of Milestone, reviews general policy matters relating to compensation
and benefits of employees of Milestone, and administers the issuance of stock options to
Milestone&#146;s officers, employees, directors and consultants. All compensation arrangements between
Milestone and its directors, officers and affiliates are reviewed by the Compensation Committee.
The Audit Committee meets with management and Milestone&#146;s independent auditors to determine the
adequacy of internal controls and other financial reporting matters; all of the members are
independent directors. The Board of Directors has determined that Pablo Felipe Serna Cardenas
qualifies as an Audit Committee Financial Expert pursuant to Item&nbsp;407 (d)(5) of Regulation&nbsp;S-K. Mr.
Cardenas is independent, as that term is defined in the listing standards of the NYSE AMEX.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Section&nbsp;16(a) Beneficial Ownership Reporting Compliance</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Section&nbsp;16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and
person who own more than ten percent of a registered class of our equity securities, to file
reports of ownership and changes in ownership with the SEC. Officers, directors and greater than
ten-percent stockholders are required by SEC regulation to furnish us with copies of all Section
16(a) forms they file. Based solely on review of the copies of such forms furnish to us, or written
representations that no Forms 5 were required, we believe that all Section 16(a) filing
requirements applicable to our officers and director were complied with during the fiscal year
ended December&nbsp;31, 2010 except that Joseph D&#146;Agostino did not timely file one Form&nbsp;4 to report the
receipt of an option grant.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Code of Ethics</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone has adopted a code of ethics that applies to its principal executive officer,
principal financial officer and other persons performing similar functions. This code of ethics is
filed herewith as an exhibit to this annual report and is posted on Milestone&#146;s web site at
<U>www.milesci.com</U>. Milestone will also provide a copy of the Code of Ethics to any person
without charge, upon written request addressed to the Chief Financial Officer, Joseph D&#146;Agostino at
the principal executive office, located at 220 South Orange Avenue, Livingston, NJ, 07039
</DIV>
<DIV align="left">
<A name="C14776119"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;11.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Executive Compensation.</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following Summary Compensation Table sets forth all compensation earned, in all
capacities, during the fiscal years ended December&nbsp;31, 2010 and 2009 by (i)&nbsp;Milestone&#146;s CEO and
(ii)&nbsp;the most highly compensated executive officers, other than the CEO who were serving as
executive officers at the end of the 2010 fiscal year and whose salary as determined by Regulation
S-K, Item&nbsp;402, exceeded $100,000 (the individuals falling within categories (i)&nbsp;and (ii)&nbsp;are
collectively referred to as the &#147;Named Executive Officers&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SUMMARY OF COMPENSATION TABLE</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>NAME AND PRINCIPAL POSITION</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>YEAR</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Salary</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Bonuses</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Awards (2)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leonard A. Osser <BR>
 Chief Executive Officer-<BR>
 effective 9-1-2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">100,000      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">50,880      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">450,880</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Chairman of the Board</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">300,000      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">100,000      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">46,280      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">49,788      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">496,068</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joseph D&#146;Agostino</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">171,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">50,000      </TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">9,000      </TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">168,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">398,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Chief Financial Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">171,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">25,000      </TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">135,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">335,312</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes $100,000 bonus in 2010. Other compensation represents payments made for personal
use of corporate apartment, health insurance coverage and car allowance. 2009 excludes a
Performance Bonus, not achieved of $300,000 and stock based compensation of $248,946 that was
reversed in 2010.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The amounts in this column reflect the fair value of the options at date of grant. For
details used in the assumption calculating the fair value of the option reward, see Note B to
the Financial Statements for the year ended December&nbsp;31, 2010 and 2009, which is located on
pages F-7 through F-11 of the Annual Report on Form 10-K. Compensation cost is generally
recognized over the vesting period of the award. See the table below entitled &#147;Outstanding
Equity Awards at December&nbsp;31, 2010.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes $50,000 and $25,000 in deferred compensation in 2010 and 2009 respectively, is
accordance with agreement to be paid in common stock and not paid until the termination of his
employment with the Company. Other compensation in 2010 includes a car allowance.</DIV></TD>
</TR>

</TABLE>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Employment Contracts</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In March&nbsp;2009, the Chairman assumed the position of Milestone&#146;s Acting Chief Executive
Officer. In September&nbsp;2009 The Chairman stepped down as Chairman to fill the position of Chief
Executive Officer. The Chief Executive Officer entered into a new employment agreement with the
Company effective September&nbsp;1, 2009. This new agreement suspends the previous agreement scheduled
to terminate on December&nbsp;31, 2012. The new agreement is for five years ending on August&nbsp;31, 2014.
The contract shall be extended for successive one-year periods, unless prior to August 1 of any
year, either party notifies the other that he or it chooses not to extend the New Employment Term.
As part of this agreement the Chairman relinquished the title and position of Chairman. Under the
new agreement, the Chief Executive Officer will receive a base compensation of $300,000 per year.
In addition, the CEO, may earn annual bonuses up to an aggregate of $400,000, payable one half in
cash and one half in common stock, contingent upon achieving targets set for each year by the
Compensation Committee of the Board of Directors of the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In addition, if in any year of the term of the agreement the CEO earns a bonus, he shall also
be granted five-year stock options to purchase twice the number of shares earned. Each such option
is to be exercisable at a price per share equal to the fair market value of a share on the date of
grant (110%) of the fair market value if the CEO is a 10% or greater stockholder on the date of
grant). The options shall vest and become exercisable to the extent of one-third of the shares
covered at the end of each of the first three years following the date of grant, but shall only be
exercisable while the CEO is employed by Milestone or within 30&nbsp;days after the termination of his
employment.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In accordance with the employment contract 571,190 shares of common stock are to be paid out
at the end of the contract in settlement of $758,333 at December&nbsp;31, 2010 and 676,190 shares of
common stock to be paid out at the end of the contract in
settlement of $925,000 at December&nbsp;31, 2009 of accrued deferred compensation and, accordingly,
such shares have been classified in stockholders&#146; equity with the common shares classified as to be
issued.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone entered into an agreement with a new Chairman effective October&nbsp;1, 2009. The term of
the contract was for a nine month period ending on June&nbsp;30, 2010. Under this agreement the Chairman
received a base compensation of $190,000 per year, payable $5,000 per month in cash starting in
January&nbsp;2010 and the remainder in stock issued at the closing price on September&nbsp;1, 2009. 84,783
shares were issued in September&nbsp;2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><U><B>Objective of Executive Compensation Program </B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The primary objective of the executive compensation program is to attract and retain
qualified, energetic managers who are enthusiastic about the mission and culture. A further
objective of the compensation program is to provide incentives and reward each manager for their
contribution. In addition, Milestone strives to promote an ownership mentality among key leadership
and the Board of Directors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Compensation Committee reviews and approves, or in some cases recommends for the approval
of the full Board of Directors, the annual compensation procedures for the Named Executive
Officers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The compensation program is designed to reward teamwork, as well as each manager&#146;s individual
contribution. In measuring the Named Executive Officers&#146; contribution, the Compensation Committee
considers numerous factors including the growth, strategic business relationships and financial
performance. Regarding most compensation matters, including executive and director compensation,
the management provides recommendations to the Compensation Committee; however, the Compensation
Committee does not delegate any of its functions to others in setting compensation. Milestone does
not currently engage any consultant to advice on executive and/or director compensation matters.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Stock price performance has not been a factor in determining annual compensation because the
price of Milestone&#146;s common stock is subject to a variety of factors outside of the control.
Milestone does not have an exact formula for allocating between cash and non-cash compensation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Annual chief executive officer compensation consists of a base salary component and periodic
stock option grants. It is the Compensation Committee&#146;s intention to set totals for the chief
executive officer for cash compensation sufficiently high enough to attract and retain a strong
motivated leadership team, but not so high that it creates a negative perception with the other
stakeholders. The chief executive officer receives stock option grants under the stock option plan.
The number of stock options granted to the executive officer is made on a discretionary rather than
a formula basis by the Compensation Committee. The chief executive officer&#146;s current and prior
compensation is considered in setting future compensation. In addition, Milestone reviews the
compensation practices of 28 other companies. To some extent, the compensation plan is based on the
market and the companies that compete for executive management. The elements of the plan (e.g.,
base salary, bonus and stock options) are similar to the elements used by many companies. The exact
base pay, stock option grant, and bonus amounts are chosen in an attempt to balance the competing
objectives of fairness to all stakeholders and attracting/retaining executive managers.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Outstanding Equity Awards at December&nbsp;31, 2010</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table includes certain information with respect to the value of all unexercised
options previously awarded to the Named Executive Officers. There were no stock awards granted in
2010.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010 Options Awards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010 Options Awards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Securities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Securities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Underlying Unexercised</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Underlying Unexercised</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Option Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Option Expiration</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Options Exercisable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Options Unexercisable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price ($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Date</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joseph D&#146;Agostino</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/20/2015</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/20/2015</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Compensation of Directors</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone paid company shares as compensation to its independent directors in 2010 as stated
below in the compensation table. On May&nbsp;26, 2010 Milestone approved annual compensation to its
directors in the amount of $30,000, one half payable in common stock shares and one half in cash.
As of December&nbsp;31, 2010, $15,000 of common shares were issued to each independent director.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table provides compensation information for the year ended December&nbsp;31, 2010 for
each of the independent directors. Directors are reimbursed for the costs relating to attending
board and committee meetings.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Director Compensation</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Stock Awards (1)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leonard M. Schiller</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leslie Bernhard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pablo Felipe Serna Cardenas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Shares valued at $1.30 per share as of May&nbsp;26, 2010, 11,538 shares per independent
director.</DIV></TD>
</TR>

</TABLE>


<DIV align="left">
<A name="C14776120"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;12.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table, together with the accompanying footnotes, sets forth information, as of
March&nbsp;30, 2011, regarding stock ownership of all persons known by Milestone to own beneficially
more than 5% of Milestone&#146;s outstanding common stock, Named Executives, all directors, and all
directors and officers of Milestone as a group:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 30, 2011</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares of Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percentage</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Names of Beneficial Owner (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Beneficially Owned (2)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>of Ownership</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Executive Officers and Directors</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leonard Osser</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,924,604                 </TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12.80</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joseph D&#146;Agostino</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">242,650                 </TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.61</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leonard Schiller</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">109,766                 </TD>
    <TD nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pablo Felipe Serna Cardenas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">86,538                 </TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leslie Bernhard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">76,538                 </TD>
    <TD nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All directors &#038; executive officers as group (5 persons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,440,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16.23</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">K. Tucker Andersen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,411,230                 </TD>
    <TD nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16.04</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tom Cheng</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">752,852                 </TD>
    <TD nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.01</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Less than 1%</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The addresses of the persons named in this table are as follows: Leonard Osser and Joseph
D&#146;Agostino are at 220 South Orange Avenue in, New Jersey 07039; Leonard M. Schiller, c/o
Schiller, Klein &#038; McElroy, P.C., 33 North Dearborn Street, Suite&nbsp;1030, Chicago, Illinois
60602; Pablo Felipe Serna Cardenas, Via Camillo Golgi 2 Opera, Italy 20090; Leslie Bernhard,
c/o AdStar, Inc., 4553 Glencoe Avenue, Suite&nbsp;325, Marina del Rey, California 90292; K. Tucker
Andersen, c/o Cumberland Associates LLC, 1114 Avenue of the Americas, New York, New York
10036.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">A person is deemed to be a beneficial owner of securities that can be acquired by such
person within 60&nbsp;days from March&nbsp;30, 2011, as applicable, upon the exercise of options and
warrants or conversion of convertible securities. Each beneficial owner&#146;s percentage
ownership is determined by assuming that options, warrants and convertible securities that
are held by such person (but not held by any other person) and that are exercisable or
convertible within 60&nbsp;days from the filing of this report have been exercised or converted.
Except as otherwise indicated, and subject to applicable community property and similar laws,
each of the persons named has sole voting and investment power with respect to the shares
shown as beneficially owned. All percentages are determined based on the number of all
shares, including those underlying options exercisable within 60&nbsp;days from the filing of this
report held by the named individual, divided by 15,030,458 outstanding shares on March&nbsp;30,
2011, plus those shares underlying options exercisable within 60&nbsp;days from the filing of this
report held by the named individual or the group.</DIV></TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">March&nbsp;30, 2011 includes 571,190 Shares to Be Issued at the termination of his employment
agreement.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">March&nbsp;30, 2011 includes 65,823 Shares to Be Issued at the termination of employment.
Includes 29,231 shares held by Mr.&nbsp;D&#146;Agostino at March&nbsp;30, 2011. Additionally, this includes
147,596 shares subject to options; 60,000 shares at $0.40; 33,166 shares at $1.15; and 21,097
shares at $1.58, and 33,333 shares at $1.00.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">March&nbsp;30, 2011, includes 85,000 stock options; 25,000 shares at $0.55 issued in June&nbsp;2009;
20,000 shares at $0.83 per share and 20,000 shares at $1.68 and 20,000 shares at $0.74. Also
included is 24,766 shares held by Mr.&nbsp;Schiller of which 11,538 shares was issued in 2010.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">March&nbsp;30, 2011 includes 75,000 stock options; 25,000 shares at $0.55 issued in June&nbsp;2009,
10,000 shares at $0.83 per share, 20,000 shares at $1.68 and 20,000 shares at $0.74 also
includes 11,538 shares issued in 2010.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">March&nbsp;30, 2011, 65,000 stock options; 20,000 shares at $1.68 and 20,000 shares at $0.74 and
25,000 shares at $0.55. Also included is 11,538 shares issued in 2010.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">March&nbsp;30, 2011 includes shares owned by Mr.&nbsp;Andersen</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">March&nbsp;30, 2011 includes shares owned Mr.&nbsp;Cheng.</DIV></TD>
</TR>

</TABLE>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Securities Authorized for Issuance Under Equity Compensation Plans</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Equity Compensation Plan Information</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table summarizes the (i)&nbsp;options granted under the Milestone 2004 Stock Option
Plans, and (ii)&nbsp;options and warrants granted outside the Milestone 2004 Stock Option Plan, as of
December&nbsp;31, 2010. The shares covered by outstanding options and warrants are subject to adjustment
for changes in capitalization, stock splits, stock dividends and similar events. No other equity
compensation has been issued.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of securities (1)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Securities (1) to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted-average exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">remaining available for</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">be issued upon exercise of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">price of outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">future issuance under</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">outstanding options and warrants</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">options and warrants</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">equity compensation plan</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation plan approved by
stockholders (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Grants under our 2004 Stock Option Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">322,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation plan not approved by
stockholders (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">Not applicable</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aggregate individual option and
warrants grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,216,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,538,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">In July&nbsp;2004 the Board of Directors approved the adoption of the 2004 Stock Option Plan. The
2004 Stock Option Plan provides for the grant of options to purchase up to 500,000 shares of
Milestone&#146;s common stock. Options may be granted to employees, officers, directors and
consultants of Milestone for the purchase of common stock of Milestone at a price not less
than the fair market value of the common stock on the date of the grant. In general, options
become exercisable over a three-year period from the grant date and expire five years after
the date of grant. No options were exercised in 2010.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">In March&nbsp;2008, the Board of Directors authorized an additional 250,000 options to this plan.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The aggregate individual option grants outside the Stock Option Plans referred to in the
table above include options issued as payment for services rendered to us by outside
consultants and providers of certain services. The aggregate individual warrant grants
referred to in the table above include warrants granted to investors in Milestone as part of
private placements and credit line arrangements.</DIV></TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">






<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Stock Plan</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2006 Milestone adopted an equity compensation plan for the issuance of up to 300,000 shares
of the common stock in lieu of cash compensation for services performed by employees, officers,
directors and consultants (the &#147;2006 Stock Plan&#148;). The purpose of the 2006 Stock Plan is to
conserve cash while allowing the Company to adequately compensate existing employees, officers,
directors and consultants, or new employees, officers, directors and consultants, whose performance
will contribute to the long-term success and growth. Milestone believe that the availability of
these shares will also strengthen the ability to attract and retain employees, officers, directors
and consultants of high competence, increase the identity of interests of such people with those of
the
stockholders and help maintain loyalty to us through recognition and the opportunity for stock
ownership. All shares granted under this plan will be at fair market value, or at a premium to that
value, on the date of grant.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of December&nbsp;31, 2010 there are no shares remaining under this plan.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2007, the Board of Directors authorized the Company to issue up to $2&nbsp;million of
its Company stock to vendors or employees, and to grant them piggy back registration rights in the
usual form, at a value of not less than 90% of the market value on the date of the agreement for
the vendor or employee to accept said shares. Such future shares are not included in the above
noted shares reserved for future issuance.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2010, the Company issued the following shares under this Plan; 50,000 shares valued at of
$50,000 for Officer Compensation, 76,661 shares valued at $104,000 for consulting services, 23,388
shares valued at $33,354 for employee compensation, 34,614 shares valued at $45,000 issued to
Directors as compensation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">At December&nbsp;31, 2010 and 2009 there was $11,316 and $143,610, respectively, available to be
issued under this plan.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Vendor Shares were issued in reliance upon the exemption from the registration
requirements of the Act, as provided in Section&nbsp;4(6) and thereof, as a transaction by an issuer not
involving a public offering. Milestone reasonably believed that each vendor had such knowledge and
experience in financial and business matters to be capable of evaluating the merits and risks of
the investment, each vendor represented an intention to acquire the securities for investment only
and not with a view to distribution thereof and appropriate legends were affixed to the stock
certificates. No commissions were paid in connection with such issuances.
</DIV>
<DIV align="left">
<A name="C14776121"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;13.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Certain Relationships and Related Transactions and Director Independence.</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On June&nbsp;28, 2007 the Company secured a $1&nbsp;million line of credit from K. Tucker Andersen, a
stockholder, beneficially owning approximately 18% of the company&#146;s outstanding stock. This
borrowing was amended to $1,300,000 as of September&nbsp;30, 2008 under the same terms and conditions as
the original. Borrowings under this line bear interest at 6% per annum, with one year&#146;s interest at
1% payable in advance on each draw. Monies may be drawn by Milestone under this line in multiples
of $100,000 upon 5&nbsp;days written notice to the stockholder from either Milestone&#146;s Chief Executive
Officer or Chief Financial Officer. Monies under this line in excess of $1,000,000 may be drawn in
multiples of $25,000. Borrowings may be prepaid at any time in multiples of $100,000, without
penalty. At September&nbsp;30, 2008 this line of Credit amount was completely drawn down. In December
2009, the Company converted the $1.3&nbsp;million principal amount of the borrowing under the line of
Credit into 822,785 shares of Common Stock at a price of $1.58 per share. Additionally, the
interest due on the principal is payable over a two year period (quarterly payments of $23,000).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company borrowed an additional $450,000 from the same stockholder in 2008. The borrowing
was originally on short term loan with a maturity date of January&nbsp;19, 2009. In December&nbsp;2008, this
borrowing was refinanced with the shareholder with a due date of June&nbsp;30, 2012. The borrowing
includes a twelve percent interest rate, interest compound quarterly, with interest and principle
due at the maturity. Further, the note provides for the issuance of warrants to the stockholder
that is exercisable for five years at the price of $0.32 per share for 45,000 shares of stock. The
warrants were valued using the Black-Scholes model and are reflected as a discount against the
debt. The Company did not have any other related party transactions pursuant to Item&nbsp;404 of
Regulation&nbsp;S-K of the Exchange Act. Milestone has adopted a policy that, in the future, the Audit
Committee must review all transactions with any officer, director or 5% stockholder. The amount
outstanding to the stockholder was $450,000 for both years ending December&nbsp;31, 2010 and 2009.
Interest expense accrued on this debt was $95,135 and $154,027 for the years ended December&nbsp;31,
2010 and 2009, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Director Independence</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Board has determined that Leonard M. Schiller and Pablo Felipe Serna Cardenas (the
&#147;Independent Directors&#148;) are independent as that term is defined in the listing standards of the
NYSE Amex. As disclosed above, Pablo Felipe Serna Cardenas and Leonard M. Schiller members of the
Audit Committee and are independent for such purposes, and Leonard M. Schiller and Leslie Bernhard
are members of the Compensation Committee and Leonard Schiller is independent for such purposes.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In determining director independence, the Board considered the option awards to the
Independent Directors for the year ended December&nbsp;31, 2010, disclosed in &#147;Item&nbsp;11 &#151; Executive
Compensation &#151; Director Compensation&#148; above, and determined that such awards were compensation for
services rendered to the Board and therefore did not impact their ability to continue to serve as
Independent Directors.
</DIV>
<DIV align="left">
<A name="C14776122"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;14.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Principal Accounting Fees and Services</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Audit Fees</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Milestone incurred audit and financial statement review fees totaling $110,738 and $148,119,
respectively from Holtz Rubenstein Reminick LLP, the principal accountant for 2010 and 2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Audit Related Fees</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There were no audit related fees to the principal accountant Holtz Rubenstein Reminick LLP in
2010 and 2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Tax Fees</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There were no fees for services related to tax compliance, tax advice and tax planning billed
by the principal accountant in 2010 and 2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>All Other Fees</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There were no other fees billed during 2010 and 2009 by Milestone&#146;s principal accountants.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Audit Committee Administration of the Engagement</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The engagement with Holtz Rubenstein Reminick LLP, the principal accountants, was approved in
advance by the Board of Directors and the Audit Committee. No non-audit or non-audit related
services were approved by the audit committee in 2010.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Audit Committee Pre-Approval Policies and Procedures</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Audit Committee charter provides that the Audit Committee will pre-approve audit services
and non-audit services to be provided by the independent auditors before the accountant is engaged
to render these services. The Audit Committee may consult with management in the decision-making
process, but may not delegate this authority to management. The Audit Committee may delegate its
authority to preapprove services to one or more committee members, provided that the designees
present the pre-approvals to the full committee at the next committee meeting. All audit and
non-audit services performed by the independent accountants have been pre-approved by the Audit
Committee to assure that such services do not impair the auditors&#146; independence from us.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">
<DIV align="left">
<A name="C14776123"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART IV</B>
</DIV>

<DIV align="left">
<A name="C14776124"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;15.</B></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Exhibits and Financial Statement Schedules</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;The following documents are filed as part of this Report:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>Financial Statements. </I>The following financial statements and the reports of
Milestone&#146;s independent auditor thereon, are filed herewith.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="16%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Report of Independent Registered Public Accounting Firm (Holtz Rubenstein LLP
-2010 and 2009)</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="16%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Balance Sheets at December&nbsp;31, 2010 and 2009</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="16%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Statements of Operations for the years ended December&nbsp;31, 2010 and 2009</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="16%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Statements of Changes in Stockholder&#146;s Equity for the years ended December&nbsp;31,
2010 and 2009</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="16%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Statements of Cash Flows for the years ended December&nbsp;31, 2010 and 2009</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="16%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Notes to Financial Statements</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>Financial Statement Schedule</I></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 8pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Schedules are omitted because the information required is not applicable or the required
information is shown in the consolidated financial statements or notes thereto</DIV></TD>
</TR>

</TABLE>
</DIV><P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>Exhibits</I></DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Certain of the following exhibits were filed as Exhibits to previous filings filed by
Milestone under the Securities Act of 1933, as amended, or reports filed under the Securities and
Exchange Act of 1934, as amended, and are hereby incorporated by reference.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>EXHIBIT</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>NO</B>.</TD>
     <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>DESCRIPTION</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certificate of Incorporation of Milestone (1)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certificate of Amendment filed July&nbsp;13, 1995 (2)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certificate of Amendment filed December&nbsp;6, 1996 (3)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certificate of Amendment filed December&nbsp;17, 1997 (4)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certificate of Amendment filed July&nbsp;23, 2003 (5)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certificate of Amendment filed January&nbsp;8, 2004. (5)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certificate of Designation filed January&nbsp;15, 2004 (5)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By-laws of Milestone (1)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Specimen stock certificate (2)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of warrant agreement, including form of warrant (6)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lease dated November&nbsp;25, 1996 between Livingston Corporate Park Associates, L.L.C. and Milestone (3)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agreement with DaVinci Instruments dated July&nbsp;30, 2003 (5)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agreement with Strider dated September&nbsp;3, 2003 (5)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agreement with Len Osser and K. Tucker Andersen, dated October&nbsp;9, 2003 (5)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agreement with Morse, Zelnick, Rose &#038; Lander dated December&nbsp;22, 2003 (5)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.6</TD>
    <TD nowrap valign="top">**</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Agreement with Leonard Osser dated December&nbsp;20, 2003 (5)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agreement with United Instruments dated October&nbsp;20, 2004 (7)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agreement with Mark Hochman dated as of January&nbsp;1, 2005 (7)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lease amendment dated April&nbsp;28, 2004 between Livingston Corporate Park Associates, L.L.C. and Milestone (7)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agreement with DaVinci regarding exclusive license over patented products dated June&nbsp;1, 2004 (8)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.11</TD>
    <TD nowrap valign="top">**</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Agreement with Leonard Osser dated September&nbsp;1, 2009. (9)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.12</TD>
    <TD nowrap valign="top">*</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Loan agreement of $1&nbsp;million from K. Tucker Andersen*</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.13</TD>
    <TD nowrap valign="top">*</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Loan agreement of $1.3&nbsp;million from K. Tucker Andersen*</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.14</TD>
    <TD nowrap valign="top">*</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Loan agreement of $450,000 from K. Tucker Andersen*</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Code of Ethics (6)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">23.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consent of Holtz Rubenstein Reminick LLP*</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rule&nbsp;13a-14(a) Certifications &#151; Chief Executive Officer*</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rule&nbsp;13a-14(a) Certifications &#151; Chief Financial Officer*</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;1350 Certifications&#151; Chief Executive Officer*</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;1350 Certifications&#151; Chief Financial Officer*</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Filed herewith.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Indicates management contract or compensatory plan or arrangement</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Incorporated by reference to Milestone&#146;s Registration Statement on Form SB-2 No.&nbsp;33-92324.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Incorporated by reference to Amendment No.&nbsp;1 to Milestone&#146;s Registration Statement on Form
SB-2 No.&nbsp;333-92324.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Incorporated by reference to Milestone&#146;s Form 10-KSB for the year ended December&nbsp;31, 1996.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Incorporated by reference to Milestone&#146;s Form 10-KSB for the year ended December&nbsp;31, 1999.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Incorporated by reference to Milestone&#146;s Registration Statement on Form S-2 No.&nbsp;333-110376,
Amendment No.&nbsp;3.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Incorporated by reference to Milestone&#146;s Form 10-KSB for the year ended December&nbsp;31, 2003.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Incorporated by reference to Milestone&#146;s Registration Statement on Form S-2 No.&nbsp;333-110367, Amendment No.&nbsp;5.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Incorporated by reference to Milestone&#146;s Form 10-KSB for the year ended December&nbsp;31, 2004.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Incorporated by reference to Milestone&#146;s Form 10-K for the year ended December&nbsp;31, 2009.</DIV></TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">





<DIV align="left">
<A name="C14776125"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SIGNATURES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In accordance with Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Milestone Scientific Inc.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Leonard Osser
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Date: March&nbsp;30, 2011
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In accordance with the Exchange Act, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Leonard Osser
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Leonard Osser
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;30, 2011&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chief Executive Officer and Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Joseph D&#146;Agostino
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Joseph D&#146;Agostino
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;30, 2011&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chief Financial Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Leonard Schiller
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Leonard Schiller
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;30, 2011&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Leslie Bernard
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Leslie Bernhard
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;30, 2011&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chairman and Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Pablo Felipe Serna Cardenas
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Pablo Felipe Serna Cardenas
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;30, 2011&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>INDEX TO FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776300">Report of Independent Registered Public Accounting Firm</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776301">Balance Sheets as of December&nbsp;31, 2010 and 2009</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776302">Statements of Operations for the years ended December&nbsp;31, 2010 and 2009</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776303">Statements of Changes in Stockholders&#146; Equity for the years ended December&nbsp;31, 2010 and 2009</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776304">Statements of Cash Flows for the years ended December&nbsp;31, 2010 and 2009</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#C14776305">Notes to Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-7</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">
<DIV align="left">
<A name="C14776300"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Report of Independent Registered Public Accounting Firm</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Board of Directors and Stockholders<BR>
Milestone Scientific Inc.

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">We have audited the accompanying balance sheets of Milestone Scientific Inc. (the &#147;Company&#148;) as of December&nbsp;31,
2010 and 2009 and the related statements of operations, stockholders&#146; equity, and cash flows for
the two years then ended. These financial statements are the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on these financial statements based on our
audits.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">We conducted our audits in accordance with standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Milestone Scientific Inc. as of December&nbsp;31, 2010 and 2009 and
the results of its operations and its cash flows for the two years then ended in conformity with
accounting principles generally accepted in the United States of America.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The accompanying financial statements have been prepared assuming that the Company will continue as
a going concern. As discussed in Note A to the financial statements, the Company has suffered
recurring losses from operations since inception, which raises substantial doubt about its ability
to continue as a going concern. Management&#146;s plans in regard to these matters are described in Note
A. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">/s/ Holtz Rubenstein Reminick LLP
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">New York, New York<BR>
March&nbsp;30, 2011

</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt">MILESTONE SCIENTIFIC INC.
</DIV>

<DIV align="left">
<A name="C14776301"></A>
</DIV><!-- xbrl,bs -->

<DIV align="center" style="font-size: 10pt">BALANCE SHEETS</DIV>
<!-- xbrl,body -->

<DIV align="center" style="font-size: 10pt">December&nbsp;31, 2010 and 2009</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current Assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">627,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,029,129</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable, net of allowance for doubtful accounts of $202,160 in 2010 and $5,000
in 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">796,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,063,742</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">986,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">804,736</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances to contract manufacturer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">730,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151,995</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254,501</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,388,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,304,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable-long term, net of allowance for doubtful accounts of $438,840 in 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to contract manufacturer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,713,794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311,230</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment in distributor, at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,319</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture, Fixtures &#038; Equipment net of accumulated depreciation of $426,482
as of December&nbsp;31, 2010 and $395,630 as of December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,353</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Patents, net of accumulated amortization of $294,934 as of December&nbsp;31, 2010
and $211,539 as of December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">944,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">947,315</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,674</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,609,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,849,994</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">LIABILITIES AND STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current Liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable &#151; short term</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,883,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,154,013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses and other payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">511,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">524,017</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,394,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,678,030</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term Liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable &#151; long term</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">440,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued Interest - 6% note</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes Payable-net of discount of $8,361 and $11,157, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">441,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">438,843</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">882,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">530,843</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and Contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; Equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, par value $.001; authorized 50,000,000 shares; 14,915,959 shares issued
637,013 shares to be issued and 14,882,626 shares outstanding as of December&nbsp;31, 2010;
14,781,295 shares issued, 692,498 shares to be issued, and 14,747,962 shares outstanding
as of December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,606,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,300,619</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(59,377,962</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58,763,454</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Treasury stock, at cost, 33,333 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(911,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(911,516</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,332,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,641,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,609,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,849,994</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<!-- /xbrl,bs -->

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="center" style="font-size: 10pt; margin-top: 10pt">MILESTONE SCIENTIFIC INC.
</DIV>

<DIV align="left">
<A name="C14776302"></A>
</DIV>
<!-- xbrl,op -->

<DIV align="center" style="font-size: 10pt">STATEMENTS OF OPERATIONS</DIV>
<!-- xbrl,body -->

<DIV align="center" style="font-size: 10pt">YEARS ENDED DECEMBER 31, 2010 AND 2009</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Product sales, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,749,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,549,060</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of products sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,531,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,458,279</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,218,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,090,781</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,648,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,952,976</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,318</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,919,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,194,294</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(700,837</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,103,513</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">777,609</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,146</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(95,135</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(154,027</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortized debt issuance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,796</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53,300</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573,428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(614,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,530,085</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss applicable to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(614,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,530,085</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss per share applicable to common stockholders -
basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.04</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding and to be issued -
basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,824,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,389,872</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">See Notes to Financial Statements
</DIV>
<!-- /xbrl,op -->

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="center" style="font-size: 10pt; margin-top: 10pt">MILESTONE SCIENTIFIC INC.
</DIV>

<DIV align="left">
<A name="C14776303"></A>
</DIV>
<!-- xbrl,se -->

<DIV align="center" style="font-size: 10pt">STATEMENTS OF CHANGES IN STOCKHOLDERS&#146; EQUITY</DIV>
<!-- xbrl,body -->

<DIV align="center" style="font-size: 10pt">YEARS ENDED DECEMBER 31, 2010 AND 2009</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Additional</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Paid-in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Treasury</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Deficit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,200,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">59,531,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(57,233,369</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(911,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,400,180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options issued to employees and consultants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,835</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock issued for payment of consulting
services to settle accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">518,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">499,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock issued for payment of employee
compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160,325</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock issued in advance of services-Chairman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock to be issued for settlement of
deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock to be issued for bonus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from exercising stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,866</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of Line of Credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">822,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,299,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,300,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds on the sale of stock option agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,530,085</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,530,085</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,473,794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,300,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(58,763,454</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(911,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,641,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options issued to employees and consultants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,817</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock issued for director&#146;s compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock issued for payment of consulting
services to settle accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock issued for payment of employee
compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,354</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock to be issued for settlement of
bonus compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reversal of common stock to be issued
for settlement of bonus compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(105,485</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(105</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,562</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,667</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(614,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(614,508</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,552,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,606,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(59,377,962</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(911,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,332,117</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">See Notes to Financial Statements
</DIV>
<!-- /xbrl,se -->

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="center" style="font-size: 10pt; margin-top: 10pt">MILESTONE SCIENTIFIC INC.
</DIV>

<DIV align="left">
<A name="C14776304"></A>
</DIV>
<!-- xbrl,cf -->

<DIV align="center" style="font-size: 10pt">STATEMENTS OF CASH FLOWS</DIV>
<!-- xbrl,body -->

<DIV align="center" style="font-size: 10pt">YEARS ENDED DECEMBER 31, 2010 AND 2009</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(614,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,530,085</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net loss to net cash provided by (used in) operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,253</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of patents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,133</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of debt discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock and options issued for compensation, consulting,
and vendor services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,444,159</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bad debt expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">640,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on sale/disposal of equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,494</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase in inventory reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">(Increase) in accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(734,197</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">(Increase) in inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182,211</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(120,834</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">(Increase) Decrease to advances to contract manufacturer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,981,060</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,665</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Decrease (Increase) to prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Decrease (Increase) in other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(126,357</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase in accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,169,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,883</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">(Decrease) Increase in accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(104,712</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">(Decrease) in deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash (used in) provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(293,777</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">402,951</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,355</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,950</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds on sale of equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment for patent rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(80,938</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(122,403</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(108,270</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(144,353</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from the sale of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from the exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,866</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,866</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NET INCREASE (DECREASE)&nbsp;IN CASH AND CASH EQUIVALENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(402,047</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,464</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,029,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">743,665</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">627,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,029,129</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Supplemental disclosure of cash flow information:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Interest expense paid in cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">92,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Supplemental disclosure of non cash activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Shares issued for conversion of note</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,300,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Shares issued to directors for compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Shares issued to employees in lieu of cash compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">160,325</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Shares issued to officer in advance of services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">97,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Shares issued to settle accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">104,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">500,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">See Notes to Financial Statements
</DIV>
<!-- /xbrl,cf -->

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl,ns -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>MILESTONE SCIENTIFIC INC.</B>
</DIV>


<DIV align="left">
<A name="C14776305"></A>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>NOTES TO FINANCIAL STATEMENTS</B>
</DIV>

<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE A &#151; ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone Scientific Inc. (&#147;Milestone&#148;) was incorporated in the State of Delaware in August&nbsp;1989.
Milestone has developed a proprietary, computer-controlled anesthetic delivery instrument, through
the use of <I>The Wand</I>, a single use disposable handpiece. The instrument is marketed in dentistry
under the trademark <I>CompuDent, Wand Plus and STA (Single Tooth Anesthesia) </I>and in medicine under
the trademark <I>CompuMed. CompuDent </I>is suitable for all dental procedures that require local
anesthetic. <I>CompuMed </I>and <I>Wand Plus </I>are suitable for many medical procedures regularly performed in
Plastic Surgery, Hair Restoration Surgery, Podiatry, Colorectal Surgery, Dermatology, Orthopedics
and a number of other disciplines. The instruments are sold in the United States and in over 37
countries abroad. Milestone&#146;s products are manufactured by a third-party contract manufacturer.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company had incurred operating
losses since its inception. The company had negative cash
flows from operating activities at December&nbsp;31, 2010 of $293,777 and a positive cash flow from
operating activities at December&nbsp;31, 2009 of $402,951. At December&nbsp;31, 2010, the Company had cash
and cash equivalents and a negative working capital of $627,082 and $6,685 respectively. The
significant working capital decrease of $1,632,758 in 2010 (negative working capital of $6,685) as
compared to 2009 (positive working capital of $1,626,073) is due to the Company&#146;s ramp up of
purchasing parts in anticipation of significant sales to our distributor in China. Such sales have
been delayed. As a result of this delay, the advance to contract manufacturer has been allocated
between current and long term. Additionally, the accounts payable due to suppliers has also been
allocated between long term and short term. And finally, the accounts receivable for the China
distributor has been allocated between current and long term, with a reserve of $636,000 provided
against the accounts receivable. Additionally, as discussed in Note I, on June&nbsp;28, 2007, the
Company secured a revolving line of credit in the aggregate amount of $1,000,000 from a stockholder
which line was fully borrowed at December&nbsp;31, 2007. The borrowing was amended to $1,300,000 as of
September&nbsp;30, 2008 under the same terms and conditions as the original borrowing. In December&nbsp;2009,
the Company converted the $1.3&nbsp;million Line of Credit into 822,785 shares of common stock at a
conversion price of $1.58 per share. Additionally, the Company borrowed an additional $450,000 in
2008 from the same shareholder, with a due date of January&nbsp;2009. This additional borrowing was
refinanced at December&nbsp;31, 2008 and the due date was extended to June&nbsp;30, 2012. The Company is
actively pursuing the generation of positive cash flows from operating activities through an
increase in revenue based upon management&#146;s assessment of present contracts and current
negotiations and reductions in operating expenses. As of December&nbsp;31, 2010, the Company does not
expect to have sufficient cash reserves to meet all of its anticipated obligations for the next
twelve months. The Company may require the need for a higher level of marketing and sales efforts
that at present it cannot fund. If the Company is unable to generate positive cash flows from its
operating activities it will need to raise additional capital. There is no assurance that the
Company will be able to achieve positive operating cash flows or that traditional capital can be
raised on terms and conditions satisfactory to the Company, if at all. If positive cash flow cannot
be achieved or if additional capital is required and it cannot be raised, then the Company would be
forced to curtail its development activities, reduce marketing expenses for existing dental
products or adopt other cost saving measures, any of which might negatively affect the Company&#146;s
operating results.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company&#146;s recurring losses raise substantial doubt about its ability to continue as a going
concern. The accompanying financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE B &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">1. Cash and Cash Equivalents
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone considers all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">2. Accounts Receivable
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The realization of Accounts Receivable current and long-term will have a significant impact on the
Company. Consequently, Milestone estimates losses resulting from the inability of its customers to
make payments for amounts billed. The collectability of outstanding amounts is continually
assessed.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">3. Product Return and Warranty
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone does not accept non-defective returns from its customers. Product returns under warranty
are accepted, evaluated and repaired or replaced in accordance with the Warranty Policy. Returns
not within the Warranty Policy are charged to the customer. Warranty expense was $43,397 and
$45,461 for 2010 and 2009, respectively. Non Warranty repairs are collected from the customers. Non
Warranty repair income was $76,172 and $81,913 for 2010 and 2009, respectively.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">4. Inventories
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Inventories principally consist of finished goods and component parts stated at the lower of cost
(first-in, first-out method) or market. Inventory quantities on hand are reviewed on a quarterly
basis and a provision for excess and obsolete inventory is recorded if required based on past and
expected future sales.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">5. Furniture, Fixture and Equipment
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Equipment is recorded at cost, less accumulated depreciation. Depreciation expense is computed
using the straight-line method over the estimated useful lives of the assets, which range from five
to seven years. The costs of maintenance and repairs are charged to operations as incurred.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">6. Investments
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Investments in less than twenty percent owned entities are accounted for under the cost basis and
are reviewed for impairment periodically. The Company does not have any significant control over
the operations of this distributor.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">7. Patents
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Patents are recorded at actual cost to prepare and file the applicable documents with the United
States Patent Office, or internationally with the applicable governmental office in the respective
country. Although certain patents have not yet been approved, the costs related to these patents
are being amortized using the straight-line method over the estimated useful life of the patent. If
the applicable patent application is ultimately rejected, the remaining unamortized balance will be
expensed in the period in which the Company receives a notice of such rejection. Patent
applications filed and patents obtained in foreign countries are subject to the laws and procedures
that differ from those in the United States. Patent protection in foreign countries may be
different from patent protection under United States laws and may not be favorable to the Company.
The Company also attempts to protect the proprietary information through the use of confidentiality
agreements and by limiting access to the facilities. There can be no assurance that the program of
patents, confidentiality agreements and restricted access to the facilities will be sufficient to
protect the proprietary technology.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">8. Impairment of Long-Lived Assets
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone reviews patents and equipment for impairment whenever events or circumstances indicate
that the carrying amounts may not be recoverable. The carrying value of the assets is evaluated in
relation to the operating performance and future undiscounted cash flows of the underlying assets.
Milestone adjusts the net book value of an underlying asset if its fair value is determined to be
less than its net book value. The Company has reviewed long-lived assets for impairment and
concluded no impairment exist as of December&nbsp;31, 2010 and December&nbsp;31, 2009, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">9. Accounts Payable
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Current and long term accounts payable represents amounts due to suppliers of the Company. Long
term accounts payable is based on an informal financing agreement with the supplier to assist in
the purchasing of instruments and handpieces, beyond one year from the balance sheet date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">10. Revenue Recognition
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Revenue from product sales is recognized net of discounts and allowances to the domestic
distributor on the date of shipment of the goods, for essentially all shipments, since the terms
are FOB warehouse. The Company will recognize revenue on date of arrival where shipments are FOB
destination. Shipments to the international distributors are FOB the warehouse and revenue is
therefore recognized on shipment. In both cases, the price to the buyer is fixed and the
collectability is reasonably assured. Further, Milestone has no obligation on these sales for any
post sale installation, set-up or maintenance, these being the responsibility of the buyer.
Customer acceptance is considered made at delivery. The only obligation after sale is the normal
commercial warranty against manufacturing defects if the alleged defective unit is returned within
the warranty period.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">11. Shipping and Handling Costs
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company includes shipping and handling costs in cost of goods sold. These costs are billed to
customers at the time of shipment for domestic shipments. International shipments are FOB the
warehouse, therefore no costs are incurred by the Company.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">12. Research and Development
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Research and development costs, which consist principally of new product development costs incurred
to third parties, are expensed as incurred.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">13. Advertising Expenses
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone expenses advertising costs as they are incurred. For the years ended December&nbsp;31, 2010
and 2009, Milestone recorded advertising expenses of $107,011 and $333,572, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">14. Income Taxes
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone accounts for income taxes pursuant to the asset and liability method which requires
deferred income tax assets and liabilities to be computed for temporary differences between the
financial statement and tax basis of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax
provision or credit is the tax payable or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">15. Basic and diluted net loss per common share
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone presents &#147;basic&#148; earnings (loss)&nbsp;per common share applicable to common stockholders and,
if applicable, &#147;diluted&#148; earnings (loss)&nbsp;per common share applicable to common stockholders
pursuant to the provisions of Statement of Financial Accounting Standards ASP Topic 260. Basic
earnings (loss)&nbsp;per common share is calculated by dividing net income or loss applicable to common
stockholders by the weighted average number of common shares outstanding and to be issued 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
debt were issued during the period.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Since Milestone had net losses for 2010 and 2009, the assumed effects of the exercise of
outstanding stock options and warrants, and the conversion of convertible debt were not included in
the calculation as their effect would have been anti-dilutive. Such outstanding options and
warrants totaled 1,538,502 at December&nbsp;31, 2010 and 1,590,141 at December&nbsp;31, 2009. The 1,538,502
options and warrants outstanding as of December&nbsp;31, 2010 which includes a 73,333 Performance
Options issued but not vested. The remaining 593,334 Performance Options in 2010, that are not
granted until earned over the next four years, if such performance targets are achieved. See Note
K.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">16. Use of Estimates
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions in
determining the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of revenues and expenses
during the reporting period. The most significant estimates relate to the allowance for doubtful
accounts, inventory valuation, and cash flow assumptions regarding evaluations for impairment of
long-lived assets and valuation allowances on deferred tax assets. Actual results could differ from
those estimates<B>.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">17. Fair Value of Financial Instruments
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Fair Value Measurements</I>: We follow the provisions of ASC 820, <I>Fair Value Measurements and
Disclosures </I>related to financial assets and liabilities that are being measured and reported on a
fair value basis. Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants in the principal market
at the measurement date (exit price). We are required to classify fair value measurements in one of
the following categories:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Level 1 inputs which are defined as quoted prices (unadjusted)&nbsp;in active markets for identical
assets or liabilities that the reporting entity has the ability to access at the measurement date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Level 2 inputs which are defined as inputs other than quoted prices included within Level 1 that
are observable for the assets or liabilities, either directly or indirectly.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Level 3 inputs are defined as unobservable inputs for the assets or liabilities.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Financial assets and liabilities are classified based on the lowest level of input that is
significant to the fair value measurement. Our assessment of the significance of a particular input
to the fair value measurement requires judgment, and may effect the valuation of the fair value of
assets and liabilities and their placement within the fair value hierarchy levels.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The carrying amounts reported in the consolidated balance sheet for cash, accounts receivable,
advances to contract manufacturer, accounts payable and accrued expenses approximate fair value
based on the maturity of these instruments.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">18.&nbsp;Stock-Based Compensation
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone accounts for stock-based compensation under ASC Topic 718, &#147;<I>Share-Based Payment. </I>ASC
Topic 718 requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the statements of operations over the service period, as an operating
expense, based on the grant-date fair values.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The weighted-average fair value of the individual options granted during 2010 and 2009 was
estimated as $0.91 and $0.91, respectively, on the date of grant. The fair value for 2010 and 2009
was determined using the Black-Scholes option-pricing model with the following weighted average
assumptions:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">122</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">203</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.13</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.83</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">3 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">3 years</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeiture Rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Issuances of common stock, stock options or other equity instruments to non-employees as
consideration for goods or services received by Milestone are accounted for based on the fair value
of the equity instruments issued (unless the fair value of the consideration received can be more
reliably measured). The fair value of any options or similar equity instruments issued is estimated
based on the Black-Scholes option-pricing model, and the assumption that all of the options or
other equity instruments will ultimately vest. Such fair value is measured as of an appropriate
date pursuant to the guidance in the consensus of the party becomes committed to provide goods or
services or the date performance by the other party is complete) and capitalized or expensed as if
Milestone had paid cash for the goods or services.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Expected volatilities are based on historical volatility of Milestone&#146;s common stock over a period
commensurate with expected term. Milestone uses historical data to estimate option exercise and
employee termination within the valuation model. The Company has granted performance based options
to the chief executive officer. Such performance based options are earned based on specific
criteria established by the Company. The Company records these options based on the likelihood of
the officer achieving the specified performance objective and accrues these costs over the
performance period. The estimates inherent in making this assessment are reviewed periodically by
management and the resulting changes are booked through the statement of operations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">19. Concentration of Credit Risk
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone&#146;s financial instruments that are exposed to concentrations of credit risk consist
primarily of cash and trade accounts receivable, and advances to contract manufacturer. Milestone
places its cash and cash equivalents with large financial institutions. At times, such investments
may be in excess of the Federal Deposit Insurance Corporation insurance limit. Milestone has not
experienced any losses in such accounts and believes it is not exposed to any significant credit
risks. Financial instruments which potentially subject Milestone to credit risk consist principally
of trade accounts receivable, as Milestone does not require collateral or other security to support
customer receivables, and advances to contract manufacturer. Milestone entered into a purchase
agreement with a vendor to supply Milestone with 5,000 instruments of <I>CompuDent </I>and 12,000 <I>STA
Instrument</I>. As part of these agreements, Milestone has advanced approximately $2,444,000 and
$463,000 to the vendor for purchase of materials at December&nbsp;31, 2010 and 2009, respectively. The
advance will be credited to Milestone as the goods are delivered. Milestone does not believe that
significant credit risk exists with respect to this advance to the contract manufacturer at
December&nbsp;31, 2010 and 2009.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone closely monitors the extension of credit to its customers while maintaining allowances,
if necessary, for potential credit losses. On a periodic basis, Milestone evaluates its accounts
receivable and establishes an allowance for doubtful accounts, based on a history of past
write-offs and collections and current credit conditions. Management has provided a reserve that it
believes is sufficient record accounts receivable at net realizable value as of December&nbsp;31, 2010
and 2009.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">20. Recent Accounting Pronouncements
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements<I>. </I>Effective for interim and annual reporting periods beginning after December&nbsp;15, 2009,
except for the disclosures about purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years
beginning after December&nbsp;15, 2010, and for interim periods within those fiscal years. This
statement does not currently impact the financial statement of the company.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In the second quarter of 2010, the FASB issued Accounting Standards Updates (ASU)&nbsp;2010-09, <I>Fair
Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements </I>(ASU
2010-06). ASU 2010-06 amends FASB ASC Topic 820, <I>Fair Value Measurements and Disclosures</I>, and
requires reporting entities to make new disclosures about recurring or nonrecurring fair-value
measurements. ASU 2010-06 also clarifies existing fair-value measurement disclosure guidance about
the level of disaggregation, inputs and valuation techniques. Except for the detailed Level 3
rollforward disclosures, we adopted the provisions of ASU 2010-06 in the first quarter of 2010.
This adoption did not affect our financial statements. We will adopt the provisions of ASU 2010-06
related to the new Level 3 rollforward disclosures in the first quarter of 2011. This adoption in
2011 will not affect our financial statements.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In the first quarter of 2010, the FASB issued ASU 2010-09, <I>Subsequent Events: Amendments to Certain
Recognition and Disclosure Requirements </I>(ASU 2010-09). ASU 2010-09 amends ASC 855, <I>Subsequent
Events, </I>so that SEC filers are no longer required to disclose the date through which subsequent
events have been evaluated in financial statements. We adopted the provisions of ASU 2010-09 in the
first quarter of 2010.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In December&nbsp;2010, the FASB issued ASU No.&nbsp;2010-28, &#147;Intangibles-Goodwill and Other (Topic 350) When
to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative
Carrying Amounts.&#148; This guidance clarifies application of Step 2 of the goodwill impairment test.
The guidance requires an entity to perform Step 2 if it is more likely than not that an impairment
exists. This accounting guidance is effective for fiscal years beginning after December&nbsp;15, 2010.
This statement does not currently impact the financial statements of the Company.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In October&nbsp;2009, the FASB issued ASU 2009-13, &#147;Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements &#151; a consensus of the FASB Emerging Issues Task Force,&#148;
which amends the criteria for when to evaluate individual delivered items in a multiple deliverable
arrangement and how to allocate consideration received. This ASU is effective for fiscal years
beginning on or after June&nbsp;15, 2010, which is January&nbsp;1, 2011 for the Corporation. The Corporation
is currently evaluating the impact of adopting the guidance. This statement does not currently
impact the financial statement of the company.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE C &#151; ACCOUNTS RECEIVABLE &#151; CURRENT AND LONG TERM</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company sells a significant amount of its product on credit terms to its major distributors.
The Company estimates losses from the inability of its customers to make payments on amounts
billed. A majority of credit sales are due within ninety days from invoicing. In 2010, the Company
shipped a significant order to a major international distributor. At the time of the shipment,
regulatory approval to sell the product in the respective country was in process. Obtaining such
regulatory approval was not a condition of the purchase order and sale to the distributor. The
regulatory approval has been delayed and as such the customer has not paid the full amount of the
invoiced shipment. The Company is receiving periodic payments from the international distributor.
Based on the periodic payment plan prepared by the international distributor, the Company has
recorded a long term net accounts receivable of $361,000 as of December&nbsp;31, 2010. The current
portion of this net accounts receivable is approximately $163,000. The Company reserved $636,000 of
the total accounts receivable from this distributor as December&nbsp;31, 2010.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE D &#151; INVENTORIES</B>
</DIV>

<!-- xbrl,body -->
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories consist of the following:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Finished Goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">766,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747,566</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Component parts and other materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,170</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">986,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">804,736</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Slow moving and overstocked inventories totaling approximately $36,000 were charged off to cost of
products sold during the year ended December&nbsp;31, 2009.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE E &#151; ADVANCES TO CONTRACT MANUFACTURER</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The net advances to contract manufacturer represent funding of future STA, CompuDent and Wand Plus
inventory purchases. The balance of the net advances as of December&nbsp;31, 2010 and 2009 totaled
$2,444,285 and $463,225, respectively. The portion of this advance expected to be utilized in the
next twelve months is classified as current asset, with the remainder classified as non-current
asset. The Company has an outstanding accounts payable of $1,521,000 and $193,000 at December&nbsp;31,
2010 and 2009, respectively to the contract manufacture specifically related to the advances.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-11<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE F &#151;FURNITURE, FIXTURES AND EQUIPMENT</B>
</DIV>

<!-- xbrl,body -->
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture, Fixtures and Equipment consist of the following:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Office furniture and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,268</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Molds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade show displays</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Computers and software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tooling equipment-STA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,377</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">STA Trials Instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tooling equipment-Wand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">493,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">472,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(426,482</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(395,630</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">77,353</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Depreciation expense was $45,243 and $50,253 for the years ended December&nbsp;31, 2010 and 2009,
respectively.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE G &#151; INVESTMENT IN DISTRIBUTOR</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In December&nbsp;2004, Milestone purchased a 19.9% equity interest in a German distribution company
which is an affiliate of Milestone&#146;s principal international distributor.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE H &#151; PATENTS</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Patents are being amortized by the straight-line method over estimated useful lives ranging from 10
to 20&nbsp;years, with a weighted average amortization period of 12&nbsp;years. Amortization expense amounted
to $83,395 in 2010 and $76,133 in 2009. Estimated amortization expense of existing patents for each
of the next five fiscal years amounts to approximately $84,912 per year.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE I &#151; LINE OF CREDIT and NOTES PAYABLE</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">On June&nbsp;28, 2007 the Company secured a $1&nbsp;million line of credit from a stockholder. This borrowing
was amended to $1,300,000 as of September&nbsp;30, 2008 under the same terms and conditions as the
original. Three year warrants exercisable at $5.00 per share, in an amount determined by dividing
50% of the amount borrowed by $5.00 will be issued on each drawdown. There is no facility fee on
the line. The warrants have been valued as of each draw down using the Black-Scholes model and are
reflected as a discount against the debt incurred under this line of credit. The full amount of the
line of credit and amendment, $1.3&nbsp;million, has been drawn at December&nbsp;31, 2008. The $1.3&nbsp;million
Line of Credit was converted into shares of Milestone&#146;s common stock in December&nbsp;2009 at a
conversion rate of $1.58 per share. A total of 822,785 shares were issued and the debt liquated at
that date. Interest on the Line of Credit of aggregated $176,655 was accrued as of December&nbsp;31,
2009. This interest will be paid in equal quarterly payments of $23,000 over the next two years.
These payments will represent the initial interest accrued plus and aggregate of $7,335 of interest
on the outstanding interest debt. The Company borrowed an additional $450,000 from the same
shareholder in 2008. The borrowing was originally on short term loan with a maturity date of
January&nbsp;19, 2009. In December&nbsp;2008, this borrowing was refinanced with the shareholder with a due
date of June&nbsp;30, 2012. The borrowing includes a twelve percent interest rate, interest compound
quarterly, with interest and principle due at the maturity. Further, the note has warrants
exercisable for five years at the price of $0.32 per share for 45,000 shares of stock. The warrants
were valued using the Black-Scholes model and are reflected as a discount against the debt. At
December&nbsp;31, 2010, the discount was $8,361.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Interest expense on this Line of Credit for the year ended December&nbsp;31, 2010 and 2009 is $95,135
and $154,027, respectively. Accrued interest related to this line of credit was $214,825 and
$245,426 at December&nbsp;31, 2010 and December&nbsp;31, 2009, respectively. The charge for amortization of
Debt Discount related to this Line of Credit is $2,796 and $53,330 for the year ended December&nbsp;31,
2010 and December&nbsp;31, 2009, respectively.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-12<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE J &#151; STOCKHOLDERS&#146; EQUITY</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">ISSUANCES OF COMMON STOCK
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">During 2010, Milestone&#146;s to be issued shares are 34,614 valued at $45,000 for the director&#146;s
compensation.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">During 2010, Milestone issued 76,666 shares valued at $104,000 for payment of consulting services.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">During 2010, Milestone issued 23,388 shares valued at $33,354 for payment of employee compensation.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">During 2010, Milestone&#146;s to be issued shares are 50,000 valued at $50,000 for the officer&#146;s
deferred compensation.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">SHARES TO BE ISSUED
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">As of December&nbsp;31, 2010 and 2009, there were 637,013 and 692,498 shares that have been deferred
from being issued, subject to employment agreements with the Chief Executive Officer and Chief
Financial Officer of the Company. Such shares will be issued to each party upon termination of
their employment.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">OUTSTANDING WARRANTS
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">At December&nbsp;31, 2010, there were 75,000 warrants outstanding. Warrants issued in connection with
the $1.3&nbsp;million Line of Credit, 30,000 warrants, exercisable at $5.00 per share expiring in 2011.
Additionally, there were 45,000 warrants in connection with the Long Term note of $450,000,
exercisable at $0.32 per share, expiring in June&nbsp;2012.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In first and second quarters of 2009, 2,227,946 warrants at $4.89 per share, to issue the
equivalent number of shares of the Company&#146;s common stock expired.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">There were no warrants issued in 2010 and 2009.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">SHARES RESERVED FOR FUTURE ISSUANCE
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">At December&nbsp;31, 2010 and 2009 there were 3,521,850 and 3,668,974 shares reserved for future
issuance including 679,667 shares in 2010 and underlying stock options available under the Stock
Option Plans, respectively; 1,538,503 and 1,590,141 shares underlying other stock options and
warrants that were outstanding at December&nbsp;31, 2010 and 2009, respectively: 637,013 shares in 2010
and 692,498 shares in 2009 to be issued in settlement of deferred compensation to Officers of the
Company; and 593,334 shares not vested and 666,667 shares in 2010 and 2009, respectively, for
Performance Options issued to an Officer of the Company. The 73,333 options were issued but not
vested in 2010 for the Performance Options noted above.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In December&nbsp;2007, the Board of Directors authorized the Company to issue up to $2&nbsp;million of its
Company stock to vendors or employees, and to grant them piggy back registration rights in the
usual form, at a value of not less than 90% of the market value on the date of the agreement for
the vendor or employee to accept said shares. Such future shares are not included in the above
noted shares reserved for future issuance.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE K &#151; STOCK OPTION PLANS</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In July&nbsp;2004, the Board of Directors approved the adoption of the 2004 Stock Option Plan. The 2004
Stock Option Plan provides for the grant of options to purchase up to 500,000 shares of Milestone&#146;s
common stock. Options may be granted to employees, officers, directors and consultants of Milestone
for the purchase of common stock of Milestone at a price not less than the fair market value of the
common stock on the date of the grant. In general, options become exercisable over a three-year
period from the grant date and expire five years after the date of grant.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">In December&nbsp;2007, the Board of Directors authorized the Company to issue up to $2&nbsp;million of
its Company stock to vendors or employees, and to grant them piggy back registration rights in the
usual form, at a value of not less than 90% of the market value on the date of the agreement for
the vendor or employee to accept said shares. Such future shares are not included in the above
noted shares reserved for future issuance.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">In November&nbsp;2009, the Board of Directors authorized 666,667 options be reserved for a special
bonus to the Chief Executive Officer of the Company, for obtaining a three year purchase order for
the sale of 12,000 STA Instruments and related handpieces over a four year period. These options
were reserved and 73,333 were granted but not vested in 2010. The remaining 593,334 were reserved
until specific performance targets are achieved. The options will be issued upon achievement of the
specific target on a yearly basis. The options were valued at $1.49 per share.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-13<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">A summary of option activity for employees under the plans as of December&nbsp;31, 2010 and 2009, and
changes during the year then ended is presented below:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Aggregate</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Averaged</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Remaining</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Intrinsic</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contractual</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Options</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price $</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Life (Years)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value $</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, January&nbsp;1, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">570,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">872,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,333</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited or expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(380,223</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,060,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">632,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable, December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">559,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,336</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited or expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(444,971</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">928,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,849</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable, December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">471,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,142</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Averaged</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Grant Date</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price $</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value $</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>VESTED OPTIONS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, January&nbsp;1, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">366,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,333</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested Options during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,333</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">559,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested Options during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(301,888</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">471,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>NONVESTED OPTIONS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested, January&nbsp;1, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">872,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(232,378</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(343,890</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested, December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.99</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(214,456</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(143,083</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested, December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone recognizes compensation expense on a straight line basis over the requisite service
period and in case of performance based options over the period of the expected performance. During
the years ended December&nbsp;31, 2010 and 2009 Milestone recognized $140,226, (net of $198,248 of stock
based compensation expense reversed in 2010; upon reversal of a 2009 bonus not achieved) and
$193,600 of total compensation cost related to options that vested each year, respectively. As of
December&nbsp;31, 2010 and 2009, there was $258,369 and $362,938 of total unrecognized compensation cost
related to non-vested options which Milestone expects to recognize over a weighted average period
of 2.3&nbsp;years and 2.5&nbsp;years for December&nbsp;31, 2010 and December&nbsp;31, 2009, respectively.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-14<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">A summary of option activity for non-employees under the plans as of December&nbsp;31, 2009 and 2010,
and changes during the year ended is presented below:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Aggregate</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Averaged</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Remaining</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Intrinsic</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contracted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Options</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price $</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Life (years)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value $</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, January&nbsp;1, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">627,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable, December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(369,134</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">414,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263,083</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable, December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234,638</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,666</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">534,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,617</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable, December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">514,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,311</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Averaged</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price $</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>VESTED OPTIONS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, January&nbsp;1, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(369,134</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,666</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">514,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>NONVESTED OPTIONS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested January&nbsp;1, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(140,554</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited during 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited during 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding, December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.21</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The fair value of the options was estimated on the date of grant using the Black Scholes
option-pricing model. For the year ended December&nbsp;31, 2010, the following weighted average
assumptions were used in calculating fair value; expected life of 3&nbsp;years; volatility of 117.82 and
risk-free interest rate of 1.64%. During the year ended December&nbsp;31, 2010 and 2009 Milestone
recognized $86,231 and $92,235 of expense related to non-employee options that vested,
respectively. The total unrecognized compensation cost related to nonvested options was $24,316 and
$14,305 as of December&nbsp;31, 2010 and 2009.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-15<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE L &#151; EMPLOYMENT CONTRACT AND DEFERRED COMPENSATION</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Employment Contracts</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In March&nbsp;2009, the Chairman assumed the position of Milestone&#146;s Acting Chief Executive Officer. In
September&nbsp;2009 The Chairman stepped down as Chairman to fill the position of Chief Executive
Officer. The Chief Executive Officer entered into a new employment agreement with the Company
effective September&nbsp;1, 2009. This new agreement suspends the previous agreement scheduled to
terminate on December&nbsp;31, 2012. The new agreement is for five years ending on August&nbsp;31, 2014. The
contract shall be extended for
successive one-year periods, unless prior to August 1 of any year, either party notifies the other
that he or it chooses not to extend the New Employment Term. As part of this agreement the Chairman
relinquished the title and position of Chairman. Under the new agreement, the Chief Executive
Officer will receive a base compensation of $300,000 per year payable. In addition, the CEO, may
earn annual bonuses up to an aggregate of $400,000, payable one half in cash and one half in common
stock, contingent upon achieving targets set for each year by the Compensation Committee of the
Board of Directors of the Company.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In addition, if in any year of the term of the agreement the CEO earns a bonus, he shall also be
granted five-year stock options to purchase twice the number of shares earned. Each such option is
to be exercisable at a price per share equal to the fair market value of a share on the date of
grant (110%) of the fair market value if the CEO is a 10% or greater stockholder on the date of
grant). The options shall vest and become exercisable to the extent of one-third of the shares
covered at the end of each of the first three years following the date of grant, but shall only be
exercisable while the CEO is employed by Milestone or within 30&nbsp;days after the termination of his
employment.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In accordance with the employment contract, as of December&nbsp;31, 2010 and December&nbsp;31, 2009, 571,190
shares of common stock are to be paid out at the end of the contract in settlement of $758,333 as
December&nbsp;31, 2010 and 676,675 shares of common stock are paid out at the end of the contract in
settlement of $925,000 at December&nbsp;31, 2009 of accrued deferred compensation and, accordingly, such
shares have been classified in stockholders&#146; equity with the common shares classified as to be
issued.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone entered into an agreement with a new Chairman effective October&nbsp;1, 2009. The term of the
contract is for a nine month period ending on June&nbsp;30, 2010. Under this agreement the Chairman will
receive a base compensation of $190,000 per year, payable $5,000 per month in cash starting in
January&nbsp;2010 and the remainder in stock issued at the closing price on September&nbsp;1, 2010. 84,783
shares were issued in September&nbsp;2009. This agreement was not renewed at June&nbsp;30, 2010.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE M &#151; INCOME TAXES</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company&#146;s expected federal income tax benefit computed at the statutory rate (34%) on the
pre-tax loss amounted to $201,000 in 2010 and $520,000 in 2009. Such benefit was not recognized in
the accompanying financial statements due to Milestone&#146;s history of past operating losses, which
required full valuation allowances for all of Milestone&#146;s deferred tax assets at December&nbsp;31, 2010
and 2009.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Deferred tax attributes resulting from differences between financial accounting amounts and tax
bases of assets and liabilities at December&nbsp;31, 2010 and 2009 are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for doubtful accounts-short term</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">81,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warranty reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred officers compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">503,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(503,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(168,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current deferred tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for doubtful accounts-long term</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net operating loss carryforward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,275,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(16,275,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(16,500,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current deferred tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The current deferred asset allowance increased by $335,000 for the year ended December&nbsp;31, 2010 and
increased by $46,000 for the year ended December&nbsp;31, 2009, respectively. The non current deferred
allowance decreased by $225,000 for the year ended December&nbsp;31, 2010.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">As of December&nbsp;31, 2010 and 2009, Milestone has federal net operating loss carryforwards of
approximately $47,657,000 and $48,361,000, respectively that will be available to offset future
taxable income, if any, through December&nbsp;2030. Milestone has state net operating losses of $631,000
and $1,500,000 in 2010 and 2009, respectively, expiring through
December&nbsp;2015. The utilization of
Milestone&#146;s net operating losses may be subject to a substantial limitation due to the &#147;change of
ownership provisions&#148; under Section&nbsp;382 of the Internal Revenue Code and similar state provisions.
Such limitation may result in the expiration of the net operating loss carry forwards before their
utilization. Milestone has established a 100% valuation allowance for all of its deferred tax
assets due to uncertainty as to their future realization.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">A reconciliation of the statutory tax rates for the years ended December&nbsp;31, is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34</TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State income tax &#151; all states</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40</TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current year valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefit for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">As a matter of course, the Company can be audited by federal and state authorities. At this
time, there are no audits identified or in process from any taxing authority.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In 2010 and 2009, Milestone received $183,673 and $777,673, respectively, for sale of tax credits
under the New Jersey Technology Business Tax Certificate Transfer Program. These amounts reduced
the State of New Jersey net operating loss carryforward to approximately $631,000 and $1,500,000
for 2010 and 2009, respectively. Such amounts are included in other income as of December&nbsp;31, 2010
and 2009, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Accounting for Uncertain Tax Positions:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company follows the Income Taxes Topic of the FASB Accounting Standards Codification, which
provides clarification on accounting for uncertainty in income taxes recognized in an enterprise&#146;s
financial statements. The guidance prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return, and also provides guidance on derecognition, classification, interest and
penalties, disclosure and transition. At December&nbsp;31, 2010, no significant income tax
uncertainties have been included in the Company&#146;s Balance Sheets. The Company&#146;s policy is to
recognize interest and penalties on unrecognized tax benefits in income tax expense in the
Statements of Operations. No interest and penalties are present for periods open. Tax returns for
the 2007, 2008, and 2009&nbsp;years are subject to audit by federal and state jurisdictions.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE N &#151; PRODUCT SALES AND SIGNIFICANT CUSTOMERS AND VENDORS</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone&#146;s sales by product and by geographical region are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Year End December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Instruments</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,690,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,176,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Handpieces</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,962,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,277,092</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,216</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,749,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,549,060</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,529,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,378,422</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canada</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">630,108</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,619,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,540,530</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,749,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,549,060</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company has informal arrangements with the manufacturer of the <I>STA</I>, <I>CompuDent </I>and <I>CompuMed</I>
instruments, one of the principal manufacturers for those instruments pursuant to which they
manufacture these products under specific purchase orders but without any long-term contract or
minimum purchase commitment. Purchases from this supplier were $3,541,806 (60.8%) and $1,960,480
(55.8%) in 2010 and 2009, respectively. The Company has a manufacturing agreement with one of the
principal manufacturers of the handpieces pursuant to which they manufacture products under
specific purchase orders but without minimum purchase commitments. Purchases from this supplier for
handpieces were $270,517 (4.6%) and $167,752 (4.8%) in 2010 and 2009, respectively. The Company has
established an alternate source of supply for the handpieces in China and other alternate sources
of supply exist. Purchases of handpieces from China represent one supplier. Purchases from this
supplier were $2,016,212 (34.6%) and $1,383,788 (39.4%) in 2010 and 2009, respectively. All other
purchases from other suppliers were not significant in either 2010 or 2009.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">For the year ended December&nbsp;31, 2010, Milestone had three customers (distributors)&nbsp;that aggregated
for approximately 60% of its net product sales. Accounts receivable, current and long term, for
these three customers amounted to approximately $1,346,966 or (73%) of gross accounts receivable.
For the year ended December&nbsp;31, 2009, Milestone had four customers (distributors)&nbsp;that aggregated
approximately 73% of its net product sales. Accounts receivable from these four customers amounted
to approximately and $533,191, or (44%) of gross accounts receivable.
</DIV>


<!-- xbrl,n -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE O &#151; COMMITMENTS AND OTHER</B>
</DIV>

<!-- xbrl,body -->
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>(1)&nbsp;Lease Commitments</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">The headquarters for the Company is located at 220 South Orange Ave, Livingston, New Jersey.
The Company leases approximately 6,300 square feet of office space at 220 South Orange Avenue in
Livingston, New Jersey. The lease term expires June&nbsp;30, 2014 at a monthly cost of $6,942 which
Milestone believes to be competitive. Additionally, Milestone leases a corporate apartment in
Maplewood, NJ. This lease expired in November&nbsp;2010 at a monthly cost of $4,000. The company
continues to lease the corporate apartment on a month to month basis. The leased offices space is
in good condition. A third party distribution and logistics center in Pennsylvania handles shipping
and order fulfillment on a month-to-month basis. Milestone also leases office and telecom equipment
under operating leases with payments ranging from $130-$522 per month.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Aggregate minimum rental commitments under noncancelable operating leases are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Year Ending December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,570</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,828</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,306</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2014</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,653</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2015</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">298,355</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">For the years ended December&nbsp;31, 2010 and 2009, respectively, rent expense amounted to
approximately $144,954 and $116,350 respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>(2)&nbsp;Contract Manufacturing Arrangement</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone has informal arrangements for the manufacture of its products. <I>STA</I>, single tooth
anesthesia, <I>CompuDent </I>and <I>CompuMed </I>instruments are manufactured for Milestone by Tricor Systems,
Inc. pursuant to specific purchase orders. <I>The Wand </I>disposable handpiece is manufactured for
Milestone in Mexico pursuant to scheduled production requirements. The STA and <I>The Wand </I>Handpiece
with Needle is supplied to Milestone by a contractor in the United States, which arranges for its
manufacturer in China. These contractors provide an informal long term financing basis for the
Company.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The termination of the manufacturing relationship with any of the above manufacturers could have a
material adverse effect on Milestone&#146;s ability to produce and sell its products. Although alternate
sources of supply exist and new manufacturing relationships could be established, Milestone would
need to recover its existing tools or have new tools produced. Establishment of new manufacturing
relationships could involve significant expense and delay. Any curtailment or interruption of the
supply, whether or not as a result of termination of such a relationship, would adversely affect
Milestone.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>(3)&nbsp;Other Commitments</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The technology underlying the <I>SafetyWand </I>and <I>CompuFlo, </I>and an improvement to the controls for
<I>CompuDent </I>were developed by the Director of Clinical Affairs and assigned to us. Milestone
purchased this technology pursuant to an agreement dated January&nbsp;1, 2005, for 43,424 shares of
restricted common stock and $145,000 in cash, payable on April&nbsp;1, 2005. In addition, the Director
will receive additional payments of 2.5% of the total sales of products using certain of these
technologies, and 5% of the total sales of products using certain other of the technologies. In
addition, he is granted, pursuant to the agreement, an option to purchase, at fair market value on
the date of the grant, 8,333 shares of the common stock upon the issuance of each additional patent
relating to these technologies. If products produced by third parties use any of these technologies
(under license from us) then he will receive the corresponding percentage of the consideration
received by Milestone for such sale or license. In 2010 and 2009 Milestone expensed the Director
royalty fees of $344,786 and $277,514 in 2010 and 2009, respectively. Additionally, Milestone expensed
consulting fees to the Director $156,000 and $154,000 and granted him 16,666 and 33,332 options,
in 2010 and 2009, respectively.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#C14776tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In January&nbsp;2010, the Company issued a purchase order to Tricor Instruments for the purchase of
12,000 <I>STA Instruments </I>to be delivered over the next three years. The purchase order is for
$5,261,640. The Company will be required to make periodic payments over the next eighteen months to
purchase the parts necessary to complete this production. As of December&nbsp;31, 2010, the Company&#146;s
production and sales of instruments to this commitment has been delayed. Consequently, advances to
contractor and accounts payable has been classified as current and long term at December&nbsp;31, 2010.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>(4)&nbsp;Other Events</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">In December&nbsp;2009, Milestone announced that it signed an Agreement of Intent with China National
Medicines Corporation, Ltd. and Yichang Humanwell Pharmaceutical Co. Ltd., both incorporated in the
People&#146;s Republic of China (PRC), to develop intra-articular and epidural drug delivery instruments
utilizing Milestone&#146;s patented <I>CompuFlo </I>technology. Milestone and its two PRC joint venture
partners will establish a new joint venture entity for this purpose in 2010. The required initial
funding for the new entity, estimated by the parties at $1.4&nbsp;million, will be provided by the two
PRC companies, although Milestone will determine the proposed uses of their contribution. The
Company believes that this new joint venture represents a significant step forward in Milestone&#146;s
efforts to have its innovative computer-controlled drug delivery technology adapted for medical
usage worldwide. The Joint Venture Agreement, as of December&nbsp;31, 2010, has not been finalized.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE P &#151; PENSION PLAN</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Milestone has a Defined Contribution Plan that allows eligible employees to contribute part of
their salary through payroll deductions. Milestone does not contribute to this plan, but does pay
the administrative costs of the plan.
</DIV>

<!-- /xbrl,ns -->


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-19<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>2
<FILENAME>c14776exv10w11.htm
<DESCRIPTION>EXHIBIT 10.11
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 10.11</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;10.11</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>EMPLOYMENT AGREEMENT</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>EMPLOYMENT AGREEMENT </B>(this &#147;Agreement&#148;) dated as of September&nbsp;1, 2009 between <B>LEONARD OSSER</B>
(the &#147;<B>Executive</B>&#148;) and <B>MILESTONE SCIENTIFIC INC. </B>(the &#147;<B>Company</B>&#148;).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>WHEREAS</B>, the Company would like to employ the Executive as its Chief Executive Officer; and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>WHEREAS</B>, the Company and the Executive desire to provide for the terms and conditions of the
future employment of the Executive by the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>NOW</B>, <B>THEREFORE</B>, in consideration of the premises and covenants herein contained, the parties
hereto agree as follows:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>1. New Employment Term and Suspension of Existing Employment Term, etc.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;Subject to the terms and conditions hereof, the Company employs the Executive and the
Executive accepts such employment for the five year period commencing September&nbsp;1, 2009 and ending
August&nbsp;31, 2014 (the &#147;<B>New Employment Term</B>&#148;), unless the New Employment Term is extended or
terminated as provided in Sections&nbsp;2 and 7, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&nbsp;The existing employment term (the &#147;<B>Existing Employment Term</B>&#148;), pursuant to an Employment
Agreement dated as of January&nbsp;1, 2008 between the Executive and the Company (the &#147;<B>2008 Agreement</B>&#148;),
is hereby suspended as of the close of business on August&nbsp;31, 2009 and the 2008 Agreement is hereby
held in abeyance as of such date (the &#147;<B>Suspension Date</B>&#148;). Notwithstanding the suspension of the
Existing Employment Term and the 2008 Agreement, the Executive shall be entitled to all
compensatory and other benefits earned by him under the 2008 Agreement prior to the <B>Suspension Date</B>
other than those under the 2008 Agreement or the Employment Agreement dated December&nbsp;20, 2003 (the
&#147;<B>2003 Agreement</B>&#148;) deferred until the expiration of Executive&#146;s employment by the Company. Upon
expiration of the Existing Employment Term the 2008 Agreement shall be reinstated and Executive&#146;s
employment thereunder shall continue for the remaining 40&nbsp;months specified under the 2008
Agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.&nbsp;Renewal. </B>The New Employment Term shall be extended for successive one-year periods unless
prior to August 1 of any year, either party notifies the other that he or it chooses not to extend
the New Employment Term. By way of example, if neither party makes an election prior to August&nbsp;1,
2014 then the New Employment Term shall automatically be extended by one additional year to August
31, 2015.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.&nbsp;Duties and Responsibilities. </B>During the New Employment Term, the Executive shall serve as
the Chief Executive Officer of the Company and as the holder of such other senior executive
positions consistent therewith as the Board may determine. He shall report to, and be subject to,
the direction of the Company&#146;s Board of Directors with such duties and responsibilities as are
commensurate with his title and position. The Executive shall work on a substantially full time
basis and shall devote his time, energy and attention to the business of the Company; it being
understood that Executive&#146;s employment hereunder shall not preclude his working on other
non-competitive business matters that do not interfere with his duties hereunder.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>4. Compensation.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;<B>Basic Compensation</B>. In payment for services to be rendered by the Executive hereunder, the
Executive shall be entitled to annual Basic Compensation in cash, less any withholding required by
law; of $300,000 per annum, payable monthly or on such more frequent schedule as the Company may
elect.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&nbsp;<B>Bonus. </B>The Executive shall be entitled to an aggregate bonus of $400,000 each year during his
employment on achieving targets set for each year by the Compensation Committee of the Board of
Directors of the Company. The Executive may also receive such other discretionary bonus amounts as
the Compensation Committee may determine. The aggregate bonus earned by Executive in any year will
be payable one-half (1/2) in cash payable as soon as practicable following the determination of the
bonus amount and one-half (1/2) by an allotment of Shares (the &#147;Bonus Shares&#148;) determined (based on
a valuation equal to one-half (1/2) of the aggregate bonus amount for such year) and issuable
within 15&nbsp;days after the expiration of the New Employment Term, or any extension thereof, as
follows:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Bonus Shares for each year shall be such number of Shares which, when valued at their
average closing price on the American Stock Exchange or on such other market or exchange on
which such Shares are then traded which publish actual closing prices, or at the average of
the closing bid and asked prices in the absence of closing prices, during the first fifteen
(15)&nbsp;trading days of December of each year during the Executive&#146;s employment, shall equal
one-half (<SUP style="font-size: 85%; vertical-align: text-top">1</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">2</SUB>) of the aggregate bonus amount.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Executive acknowledges that the Shares issuable under this Section 4(b) will be taken by him
for investment and not for distribution thereof and will not be sold or otherwise disposed of in
violation of the Securities Act of 1933 as amended and the rules and regulations promulgated
thereunder.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(c)&nbsp;<B>Options. </B>If in any year the Executive receives an allotment of Bonus Shares under Section
4(b) above, he shall also be entitled to receive options to purchase two times the number of Bonus
Shares included in the allotment. The options shall be issued at the same time that the Bonus
Shares are allotted and shall be exercisable at a per share purchase price equal to 100% of fair
market value on the date of grant or 110% of fair market value if the Executive is the owner of 10%
or more of the Company&#146;s outstanding shares. Such options shall have a five (5)&nbsp;year duration and
shall vest and become exercisable to the extent of one-third (1/3) of the options granted at the
expiration of each of the first three (3)&nbsp;years from the date of grant. The vested options shall
be exercisable only while Executive is employed by the Company or within thirty (30)&nbsp;days after any
termination of employment. The options shall contain anti-dilution protection in the event of
stock dividends and splits and such other provisions as are customary in option grants of this
kind.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(d)&nbsp;<B>Specified Employee. </B>If the Executive is a &#147;specified employee&#148; of the Company within the
meaning of Section&nbsp;409A(a)(2)(B)(i) of the Internal Revenue Code (the &#147;Code&#148;) (or any successor
provision), no payment under this Section&nbsp;4 or under the provisions for the deferral of
compensation under the 2003 Agreement and 2008 Agreement in connection with the Executive&#146;s
termination of employment (other than a payment of salary through the date of such termination, and
payments on account of termination of employment by reason of death) shall be made until the date
which is six (6)&nbsp;months after the date of the termination of the employment of the Executive (or,
if earlier, the date of death of the Executive); provided further, if the Company determines based
upon written advice of counsel that any such payment if made during the calendar year that includes
the termination date would not be deductible in whole or in part by reason of Code &#167; 162(m), such
payment shall be made on January 2 of the following calendar year (or such later date as may be
required under the preceding proviso if the Executive is a &#147;specified employee&#148;).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.&nbsp;Expenses. </B>During the New Employment Term, the Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by him (in accordance with the policies
and procedures established from time to time by the Board of Directors of the Company) in
performing services hereunder, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>6. Other Benefits</B>. The Executive shall be entitled to the following additional benefits:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;six weeks of paid vacation during each year of the term; it being understood and agreed
that Executive shall be entitled to take such additional paid vacation time as does not interfere
with the performance of his duties hereunder and as are not reasonably objected to by the Company&#146;s
Board of Directors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&nbsp;Paid holidays in accordance with the Company&#146;s usual holiday schedule plus eight
additional paid holiday, or personal days, to be taken at such time as the Executive determines;
it being understood and agreed that Executive shall be entitled to take such additional paid
holidays or paid personal days as do not interfere with the performance of his duties hereunder and
as are not reasonably objected to by the Company&#146;s Board of Directors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(c)&nbsp;Such major medical, family health and dental coverage benefits and long-term disability
group plan coverage generally available to the Company&#146;s officers. To the extent the Executive
qualifies, the Executive may participate in, or benefit under, any employee benefit plan,
arrangement or perquisite made available by the Company to its key executives.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(d)&nbsp;The Company shall reimburse the Executive for such ordinary and necessary business related
expenses as shall be incurred by the Executive in the course of the performance of his duties under
this Agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(e)&nbsp;A monthly car allowance in the amount of the monthly rental cost of a luxury sedan or its
equivalent plus expenses for business use.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>7.&nbsp;Termination. </B>The Executive&#146;s employment hereunder may be terminated under the following
circumstances:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;The Company shall have the right to terminate the employment of the Executive under this
Agreement for disability in the event the Executive suffers an injury, or physical or mental
illness or incapacity of such character as to substantially disable him from performing his duties
hereunder for a period of more than one hundred eighty (180)&nbsp;consecutive days upon the Company
giving at last thirty (30)&nbsp;days written notice of termination; provided, however, that if the
Executive is eligible to receive disability payments pursuant to a disability insurance policy or
policies paid for by the Company, the Executive shall assign such benefits to the Company for all
periods as to which he is receiving payment under this Agreement.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">(b)&nbsp;This Agreement shall terminate upon the death of Executive.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(c)&nbsp;The Company may terminate this Agreement at any time for &#147;Cause&#148; because of (i)&nbsp;his being
convicted of criminal charges or violating such rules and regulations of the Securities and
Exchange Commission as may result in criminal action or material fines against the Company. (ii)
Executive&#146;s material breach of any term of this Agreement or (iii)&nbsp;the willful engaging by the
Executive in misconduct which is materially injurious to the Company, monetarily or otherwise;
provided, in the case or (ii)&nbsp;or (iii), however, that the Company shall not terminate this
Agreement pursuant to this Section 7(c) unless the Company shall first have delivered to the
Executive a notice which specifically identifies such breach or misconduct, specifies reasonable
corrective action and the Executive shall not have cured the breach or corrected the misconduct
within fifteen (15)&nbsp;days after receipt of such notice.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(d)&nbsp;The Executive may terminate his employment for &#147;Good Reason&#148; on five days written
notice if:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">he is assigned, without his express written consent, any duties
inconsistent with his positions, duties, responsibilities, authority and status
with the Company as of the date hereof, or a change in his reporting
responsibilities or titles as in effect as of the date hereof, except in
connection with the termination of his employment by him without Good Reason; or</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">his compensation is reduced or</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">any purchaser or purchasers of substantially all of the business
or assets of the Company do not agree, at or prior to the closing of any such
transaction, by agreement in form and substance satisfactory to the Executive to
perform this Agreement in the same manner and to the same extent that the Company
would be required to perform if no sale was consummated.</DIV></TD>
</TR>

</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>8. Nondisclosure; Noncompetition.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;The Executive agrees not to use or disclose, either while in the Company&#146;s employ or at
any time thereafter, except with the prior written consent of the Board of Directors, any trade
secrets, proprietary information, or other information that the Company considers confidential
relating to processes, suppliers (including but not limited to a list or lists of suppliers),
customers (including but not limited to a list or lists of customers), compositions, improvements,
inventions, operations, processing, marketing, distributing, selling, cost and pricing data, or
master files utilized by the Company, not presently generally known to the public, and which is,
obtained or acquired by the Executive while in the employ of the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&nbsp;During his employment and for a period of two years thereafter, the Executive shall not,
directly or indirectly; (i)&nbsp;in any manner, engage in any business which competes with any business
conducted by the Company (including any subsidiary) and will not directly or indirectly own,
manage, operate, join, control or participate in the ownership, management, operation or control
of, or be employed by or connected in any manner with any corporation, firm or business that is so
engaged (provided, however, that nothing herein shall prohibit the Executive from owning not more
than three percent (3%) of the outstanding stock of any publicly held corporation), (ii)&nbsp;persuade
or attempt to persuade any employee of the Company to leave the employ of the Company or to become
employed by any other entity, or (iii)&nbsp;persuade or attempt to persuade any current client or former
client with leaving, or to reduce the amount of business it does or intends or anticipates doing
with the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(c)&nbsp;During his employment with the Company, and for two years thereafter, the Executive shall
not take any action which might divert from the Company any opportunity learned about by him during
his employment with the Company (including without limitation during the New Employment Term) which
would be within the scope of any of the businesses then engaged in or planned to be engaged in by
the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(d)&nbsp;In the event that this Agreement shall be terminated, then notwithstanding such
termination, the obligations of the Executive pursuant to this Section&nbsp;8 of this Agreement shall
survive such termination.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>9. Successors; Binding Agreement.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;The Company shall require any purchaser or purchasers of the Company or any purchaser or
purchasers of substantially all of the business or assets of the Company, by agreement in form and
substance satisfactory to the Executive, to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it if no such purchase
had taken place. As used in this Agreement, &#147;Company&#148; shall mean the Company as hereinbefore
defined and any successor to its business or assets which executes and delivers the agreement
provided for in this Section 9(a) or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&nbsp;This agreement shall inure to the benefit of and be enforceable by the Executive&#146;s
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still be payable
hereunder if the Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the Executive&#146;s devisee,
legatee or other designee or, if there be no such designee, to the Executive&#146;s estate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>10.&nbsp;Amendment; Waiver</B>. No provisions of this Agreement may be modified, supplemented, waived
or discharged unless such waiver, modification or discharge is agreed to in a writing signed by the
Executive and the Company. No waiver by either party hereto at any time of any breach by the other
party hereto of, or in compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>11.&nbsp;Applicable Law. </B>The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New Jersey without regard to its conflict
of laws principles.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>12.&nbsp;Severability of Covenants</B>. In the event that any provision of this Agreement, including
any sentence, clause or part hereof, shall be deemed contrary to law or invalid or unenforceable in
any respect by a court of competent jurisdiction, the remaining provisions shall not be affected,
but shall remain in full force and effect and any invalid and enforceable provisions shall be
deemed, without further action on the part of the undersigned, modified, amended and limited solely
to the extent necessary to render the same valid and enforceable.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>13. Remedies.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;In the event of a breach or threatened breach of any of the Executive&#146;s covenants under
Section&nbsp;8, the Executive acknowledges that the Company will not have an adequate remedy at law.
Accordingly, in the event of any such breach or threatened breach, the Company will be entitled to
such equitable and injunctive relief as may be available to restrain the Executive from the
violation of the provisions thereof.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&nbsp;Nothing herein shall be construed as prohibiting the Company, on the one hand, and the
Executive, on the other hand, from pursuing any remedies available at law or in equity for any
breach or threatened breach of the provisions of this Agreement by the other party, including the
recovery of damages.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(c)&nbsp;If the Company terminates this Agreement at any time without Cause (as defined above in
section 7(c)) or the Executive terminates his employment for a Good Reason (as defined above in
Section&nbsp;7(d)), after January&nbsp;1, 2008, the Executive shall be entitled under this Section 13(c) to
receive an amount equal to the amount of the compensation payments that, but for his termination of
employment, would have been payable to the Executive under Section 4(a) as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Termination under Section 13(c)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Compensation under Section 4(a)</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Within the first full calendar year
of the Executive&#146;s employment
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">an amount equal to the amount of
compensation payments for 4&nbsp;months</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Within the second full calendar year
of the Executive&#146;s employment
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">an amount equal to the amount of
compensation payments for 12&nbsp;months</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Within or after the third full
calendar year of the Executive&#146;s
employment
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">an amount equal to the amount of
compensation payments for one 18
month period</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Executive shall also be entitled to the amounts of any bonus payments under
&#167;4(b) for the year of termination to the extent that targets were achieved
prior to the date of termination.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(d)&nbsp;The above amounts shall be deemed liquidated damages, and not a penalty. The Executive
shall not be required to mitigate the amount of any payment received pursuant to this paragraph nor
shall the amount payable under this paragraph be reduced by any compensation earned by the
Executive after the date of his termination of employment.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>14.&nbsp;Notices. </B>Any notice, request, instruction or other document to be given hereunder by any
party to the other party shall be in writing and shall be deemed to have been duly given when
delivered personally or five (5)&nbsp;days after dispatch by registered or certified mail, postage
prepaid, return receipt requested, to the party to whom the same is so given or made:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>If to the Company</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">addressed to:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Milestone Scientific Inc.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>45 KNIGHTBRIDGE ROAD</U></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>PISCATAWAY, NEW JERSEY 08854</U></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">with a copy to:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Morse, Zelnick, Rose &#038; Lander, LLP</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>405 PARK AVENUE, SUITE 1401</U></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>NEW YORK, NEW YORK 10022</U></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>If to the Executive</B><BR>
&nbsp;&nbsp;&nbsp;
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">addressed to:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mr. Leonard Osser</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">101 John Dietz Road</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PO Box 228</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Callicoon Center, NY 12724</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">or to such other address as the one party shall specify to the other party in writing.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>15.&nbsp;Entire Agreement</B>. This Agreement sets forth the entire agreement of the parties hereto
in respect of the subject matter contained herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated and canceled.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>IN WITNESS WHEREOF</B>, the parties have executed this Agreement on the date and year first above
written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>MILESTONE SCIENTIFIC INC.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Leslie Bernhard
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Leslie Bernhard, Chairman&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                          /s/ Leonard Osser
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Leonard Osser&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>3
<FILENAME>c14776exv10w12.htm
<DESCRIPTION>EXHIBIT 10.12
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 10.12</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;10.12</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt">June&nbsp;28, 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Mr.&nbsp;K. Tucker Andersen<BR>
61 Above All Road<BR>
Warren, CT 06754

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><I>Line of Credit for $1,000,000</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Dear Tucker:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">This will confirm that you have opened a line of credit for Milestone Scientific Inc., in the
aggregate amount of $1,000,000. Borrowings under line will bear interest at the rate of 6% per
annum, compounded quarterly in arrears, with one year&#146; interest at 1% payable in advance on each
draw down and will be evidenced by a promissory &#147;grid&#148; note in usual form. Monies may be drawn by
Milestone under the line in multiples of $100,000 upon 5&nbsp;days&#146; written notice to you from either
Milestone&#146;s Chief Executive Officer or Chief Financial Officer. Borrowings may be prepaid at any
time in multiples of $100,000, without penalty. The line will expire on December&nbsp;31, 2008 and all
borrowings under the line and interest thereon will be payable in cash, or in Milestone Common
Stock as provided below, on June&nbsp;30, 2010.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Promptly after each draw down of funds under the line, Milestone will issue to you three-year
warrants exercisable at $5.00 per share in an amount determined by dividing 50% of the amount
borrowed by $5.00.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">After December&nbsp;31, 2008 and before June&nbsp;30, 2010, (i)&nbsp;Milestone, at its option, may, pay the
outstanding balance of the loan, including interest thereon, by issuing shares of Common Stock to
you valued at the lower of $2.00 per share or 80% of the average closing price of its shares during
the 20 trading days ending with December&nbsp;31, 2008 and (ii)&nbsp;you may convert all or any part of the
then outstanding balance owed to you, including accrued interest thereon, into shares of Common
Stock at $4.00 per share by written notice to Milestone.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Your representations and warranties as &#147;Purchaser&#148; in connection with this Note and any
warrants or shares of Common Stock issued in connection therewith are set forth on Exhibit&nbsp;A
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If this conforms with your understanding with Milestone please countersign and return the copy
of this letter.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Very truly yours<BR>
MILESTONE SCIENTIFIC INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="1">by: </TD>
    <TD align="left">&nbsp;</TD>
    <TD align="left" style="border-bottom: 1px solid #000000">/s/ Leonard Osser </TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD colspan="1" align="left">Leonard Osser, Chairman and&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD colspan="1" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Accepted and agreed to<BR>
This 29<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day of June, 2007

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ K. Tucker Andersen
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
K. Tucker Andersen
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>4
<FILENAME>c14776exv10w13.htm
<DESCRIPTION>EXHIBIT 10.13
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 10.13</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;10.13</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt">April&nbsp;18, 2008
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Mr.&nbsp;K. Tucker Andersen<BR>
61 Above All Road<BR>
Warren, CT 06754

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><I>Line of Credit for $1,300,000</I>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Dear Tucker:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">This will confirm that the line of credit you opened for Milestone Scientific Inc. as of June
28, 2007, in the aggregate amount of $1,000,000, has been increased to $1,300,000. Monies under
the line in excess of $1,000,000 may be drawn in multiples of $25,000. The other terms of the
letter agreement continue unchanged.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If this conforms with your understanding with Milestone please countersign and return the copy
of this letter. Milestone will then issue to you a new promissory note evidencing the increased
line of credit in exchange for the prior promissory note.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Very truly yours<BR>
MILESTONE SCIENTIFIC INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="1" align="left">by:</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="left" style="border-bottom: 1px solid #000000"> /s/ Joe W. Martin&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD colspan="1" align="left">Joe W. Martin&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD colspan="1" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Accepted and agreed to<BR>
this 18th&nbsp;day of April, 2008
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ K. Tucker Andersen
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
K. Tucker Andersen
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14
<SEQUENCE>5
<FILENAME>c14776exv10w14.htm
<DESCRIPTION>EXHIBIT 10.14
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 10.14</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;10.14</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PROMISSORY NOTE</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">$450,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;24, 2008</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">FOR VALUE RECEIVED on July&nbsp;7, 2008, the undersigned, <B>MILESTONE SCIENTIFIC INC.</B>, a Delaware
corporation (&#147;Milestone&#148;), promises to pay to the order of <B>K. Tucker Andersen </B>(the &#147;Holder&#148;), on
June&nbsp;30, 2012 (the &#147;Maturity&#148;) or on such earlier date as Milestone may determine, without penalty,
upon reasonable notice to the Holder, the principal sum of <B>FOUR HUNDRED FIFTY THOUSAND DOLLARS
($450,000), </B>or, if less than such amount, the aggregate unpaid principal amount of the borrowings,
remaining under this Promissory Note (this &#147;Note&#148;). Interest on the unpaid principal amount is
payable at the Maturity. Interest shall accrue at a rate of twelve percent per annum, compounded
quarterly on the outstanding balance. Both principal and interest payable as provided in this Note
shall be made in lawful money of the United States of America at 61 Above All Road, Warren, CT
06754, or such other such place within the United States as from time to time may be designated by
the Holder of this Note.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On the date hereof, Milestone shall issue to the Holder warrants exercisable for 45,000 shares
of Milestone&#146;s common stock at $<B>&#091;the average of the closing prices per share on each of the 20&nbsp;days
prior to the signing of this Note&#093; </B>per share (the &#147;Warrants&#148;). The Warrants shall be exercisable
upon issuance and shall expire on the Maturity.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Should the indebtedness represented by this Note or any part thereof be collected at law or in
equity through any bankruptcy, receivership, probate or other court proceedings or if this Note is
placed in the hands of attorneys for collection after default, Milestone will pay the Holder of
this Note in addition to the principal and interest due and payable hereon all the costs and
expenses of the Holder in enforcing this Note including, without limitation, reasonable attorneys&#146;
fees and legal expenses.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">This Note and the rights, duties and liabilities of the parties hereunder or arising from or
relating in any way to the indebtedness evidenced by this Note or the transaction of which such
indebtedness is part shall be governed by and in accordance with the law of the State of New Jersey
and the law of the United States applicable to transactions within such State.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">No amendment to this Note shall be binding unless expressed in a writing executed by Milestone
and the Holder of this Note.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>MILESTONE IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW JERSEY OR FEDERAL
COURT SITTING IN NEW JERSEY OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
OF THE LOAN DOCUMENTS, AND MILESTONE HEREBY AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF
SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY NEW JERSEY OR FEDERAL COURT SITTING IN NEW JERSEY MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO MILESTONE AT THE ADDRESS
INDICATED BELOW, AND SERVICE SO MADE SHALL BE COMPLETE FIVE DAYS AFTER THE SAME SHALL HAVE BEEN SO
MAILED.</B>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">MILESTONE SCIENTIFIC INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/Joe W.  Martin
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Joe W. Martin, Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>6
<FILENAME>c14776exv23w1.htm
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 23.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;23.1</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">We consent to the incorporation by reference in the registration statements (Form S-8 No.
333-134245 and No.&nbsp;333-404413) of Milestone Scientific Inc. and in the related Prospectus of our
report dated March&nbsp;30, 2011 with respect to our audit of the financial statements of Milestone
Scientific Inc. included in this Annual Report on Form 10-K for the year ended December&nbsp;31, 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">/s/ Holtz Rubenstein Reminick LLP<BR>
<BR>
New York, New York<BR>
March&nbsp;30, 2011

</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>7
<FILENAME>c14776exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 31.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;31.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Rule&nbsp;13a-14(a)/15d-14(a) Certification</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">I, Leonard Osser, certify that:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">1.&nbsp;I have reviewed this annual report on Form 10-K of Milestone Scientific;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">2.&nbsp;Based on my knowledge, this 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
report;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">3.&nbsp;Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">4.&nbsp;The registrant&#146;s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under the supervision, to ensure that material information relating to
the registrant including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&nbsp;Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under the supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and
presented in this report the 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
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over financial
reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant&#146;s internal control over financial reporting; and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">5.&nbsp;The registrant&#146;s other certifying officer(s) and I have disclosed, based on the most recent
evaluation of internal control over financial reporting, to the small business issuer&#146;s auditors
and the audit committee of the registrant&#146;s board of directors (or persons performing the
equivalent functions):
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;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
registrant&#146;s ability to record, process, summarize and report financial information; and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&nbsp; Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant&#146;s internal control over financial reporting.</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Date: March&nbsp;30, 2011
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">     /s/ Leonard  Osser
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Leonard  Osser&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>8
<FILENAME>c14776exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 31.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;31.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Rule&nbsp;13a-14(a)/15d-14(a) Certification</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">I, Joseph D&#146;Agostino, Chief Financial Officer, certify that:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">1.&nbsp;I have reviewed this annual report on Form 10-K of Milestone Scientific;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">2.&nbsp;Based on my knowledge, this 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
report;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">3.&nbsp;Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">4.&nbsp;The registrant&#146;s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under the supervision, to ensure that material information relating to
the registrant including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&nbsp;Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under the supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and
presented in this report the 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
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over financial
reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant&#146;s internal control over financial reporting; and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">5.&nbsp;The registrant&#146;s other certifying officer(s) and I have disclosed, based on the most recent
evaluation of internal control over financial reporting, to the small business issuer&#146;s auditors
and the audit committee of the registrant&#146;s board of directors (or persons performing the
equivalent functions):
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(a)&nbsp;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
registrant&#146;s ability to record, process, summarize and report financial information; and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant&#146;s internal control over financial reporting.</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Date: March&nbsp;30, 2011
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Joseph D&#146;Agostino
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Joseph D&#146;Agostino&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>9
<FILENAME>c14776exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 32.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt">CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with the annual report of Milestone Scientific Inc (the &#147;Company&#148;) on Form 10-K
for the period ending December&nbsp;31, 2010 as filed with the Securities and Exchange Commission on the
date hereof (the &#147;Report&#148;), I, Leonard Osser, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002,
that:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(1)&nbsp;The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(2)&nbsp;The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><U>Dated: March&nbsp;30, 2011</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Leonard Osser
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Leonard Osser
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chief Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">A signed original of this certification has been provided to the Company and will be retained by
the Company and furnished to the Securities and Exchange Commission or its staff upon request.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>10
<FILENAME>c14776exv32w2.htm
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 32.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;32.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt">CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with the annual report of Milestone Scientific Inc (the &#147;Company&#148;) on Form 10-K
for the period ending December&nbsp;31, 2010 as filed with the Securities and Exchange Commission on the
date hereof (the &#147;Report&#148;), I, Joseph D&#146;Agostino, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002,
that:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(1)&nbsp;The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(2)&nbsp;The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Dated: March&nbsp;30, 2011.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Joseph D&#146;Agostino
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Joseph D&#146;Agostino
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chief Financial Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">A signed original of this certification has been provided to the Company and will be retained by
the Company and furnished to the Securities and Exchange Commission or its staff upon request.<BR>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
