SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

Mark One

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2003

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number 001-14053

                            MILESTONE SCIENTIFIC INC.
             (Exact name of Registrant as specified in its charter)

Delaware                                                              13-3545623
State or other jurisdiction                                     (I.R.S. Employer
or organization)                                             Identification No.)

              220 South Orange Avenue, Livingston, New Jersey 07039
               (Address of principal executive office) (Zip Code)

                                 (973) 535-2717
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) or the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes |X| No |_|

As of November 11, 2003, the Registrant had a total of 18,271,022 shares of
Common stock, $.001 par value, outstanding.

<PAGE>

                           FORWARD LOOKING STATEMENTS

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


                                       2
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

                                      INDEX

                                                                            PAGE
                                                                            ----

PART I.  FINANCIAL INFORMATION

         ITEM 1. Condensed Consolidated Financial Statements

                 Condensed Consolidated Balance Sheets
                 September 30, 2003 (Unaudited) and December 31, 2002          4

                 Condensed Consolidated Statements of Operations
                 Three and Nine Months Ended September 30, 2003 and
                 2002 (Unaudited)                                              5

                 Condensed Consolidated Statements of Cash Flows
                 Nine Months Ended September 30, 2003 and 2002
                 (Unaudited)                                                 6-7

                 Notes to Condensed Consolidated Financial Statements
                 (Unaudited)                                                8-16

         ITEM 2. Management's Discussion and Analysis or Plan of
                 Operations                                                17-25

         ITEM 3  Controls and Procedures                                      26

PART II. OTHER INFORMATION

         ITEM 4. Submission of Matters to a Vote of Security Holders          26

         ITEM 6. Exhibits and Reports on Form 8-K                             27

SIGNATURES                                                                    27

CERTIFICATIONS                                                                37

EXHIBITS                                                                      __


                                       3
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                    September 30, 2003 and December 31, 2002

<TABLE>
<CAPTION>
                                                                                    September 30, 2003    December 31, 2002
                                                                                       (unaudited)
<S>                                                                                    <C>                  <C>
ASSETS
CURRENT ASSETS:
      Cash                                                                             $     95,870         $      9,683
      Accounts receivable, net                                                              611,602              239,435
       Inventories                                                                          255,288              119,291
       Advances to contract manufacturer                                                    250,360              300,000
       Deferred debt financing costs, net                                                        --              159,877
       Prepaid expenses                                                                      61,611               64,952
                                                                                       ------------         ------------
                                                                                          1,274,731              893,238
                      Total current assets                                                  205,158              227,207
EQUIPMENT, net                                                                                   --               87,935
ADVANCES TO CONTRACT MANUFACTURER -- Long term                                                1,964                   --
DEFERRED DEBT FINANCING-Long term                                                            32,333               32,333
OTHER ASSETS                                                                           ------------         ------------
                      Totals                                                           $  1,514,186         $  1,240,713
                                                                                       ============         ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
       Account payable, including $32,000 to related parties                           $  1,177,061         $  1,269,523
       Accrued expenses                                                                      57,080               86,492
       Accrued interest                                                                     197,585              169,519
       Notes payable, net of debt discount                                                  915,485            4,581,708
       Notes payable-officer/stockholder                                                    376,215                   --
                                                                                       ------------         ------------
                 Total current liabilities                                                2,723,426            6,107,242
Accounts payable, including $160,000 to related parties                                     492,193                   --
Accrued interest                                                                              1,042              139,323
Deferred compensation payable to officer/stockholder                                        560,000              320,000
Notes payable, net of debt discount                                                         582,514              480,091
Notes payable -- officer/stockholder                                                         32,000              300,000
                                                                                       ------------         ------------
                 Total liabilities                                                        4,391,175            7,346,656
                                                                                       ------------         ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY:
      Preferred stock, par value $.001 authorized 5,000,000 shares                               --                   --
      8% Cumulative convertible preferred par value $.001; authorized and
      issued 25,365 shares;                                                                      25                   --
      Common stock, par value $.001; authorized,
             50,000,000 shares; 17,672,626 shares and 12,733,370 shares issued,
             at September 30, 2003 and December 31, 2002, respectively                       17,673               12,733
      Additional paid-in capital                                                         41,610,978           36,599,607
      Accumulated deficit                                                               (43,574,149)         (41,786,767)
      Unearned compensation                                                                 (20,000)             (20,000)
      Treasury stock, at cost, 100,000 shares                                              (911,516)            (911,516)
                                                                                       ------------         ------------
               Total stockholders' deficiency                                            (2,876,989)          (6,105,943)
                                                                                       ------------         ------------
                 Totals                                                                $  1,514,186         $  1,240,713
                                                                                       ============         ============
</TABLE>

See Notes to Condensed Consolidated Financial Statements


                                       4
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           Three Months Ended                        Nine Months Ended
                                                           ------------------                        -----------------
                                                    September 30,       September 30,         September 30,       September 30,
                                                        2003                 2002                 2003                 2002
                                                        ----                 ----                 ----                 ----
<S>                                                 <C>                  <C>                  <C>                  <C>
Net sales                                           $    966,591         $  1,034,190         $  3,101,281         $  3,215,907
Cost of sales                                            511,867              517,292            1,560,288            1,499,063
                                                    ------------         ------------         ------------         ------------

Gross Profit                                             454,724              516,898            1,540,993            1,716,844
                                                    ------------         ------------         ------------         ------------

Selling, general and administrative expenses             891,322              877,441            2,491,737            2,712,649
Charge in connection with the closing of the
    Deerfield, IL facility                                13,150                   --               79,023                   --
Research and development expenses                         29,066               18,549              112,158               63,928
                                                    ------------         ------------         ------------         ------------

                               Totals                    933,538              895,990            2,682,918            2,776,577
                                                    ------------         ------------         ------------         ------------

Loss from operations                                    (478,814)            (379,092)          (1,141,925)          (1,059,733)

Other income                                                  --               24,000                   --               72,000
Interest, net                                           (149,766)            (226,739)            (645,457)            (616,519)
                                                    ------------         ------------         ------------         ------------

Net loss                                            $   (628,580)        $   (581,831)        $ (1,787,382)        $ (1,604,252)
                                                    ============         ============         ============         ============

Loss per share - basic and diluted                  $       (.05)        $       (.05)        $       (.14)        $       (.13)
                                                    ============         ============         ============         ============

Weighted average shares outstanding -basic
     and diluted                                      12,687,331           12,412,618           12,651,556           12,253,022
                                                    ============         ============         ============         ============
</TABLE>

See Notes to Condensed Consolidated Financial Statements.


                                       5
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                                            2003                2002
                                                                                        -----------         -----------
<S>                                                                                     <C>                 <C>
Cash flows from operating activities:
     Net loss                                                                           $(1,787,382)        $(1,604,252)
     Adjustments to reconcile net loss to net cash used in operating activities:
         Depreciation                                                                        26,618              41,672
         Amortization of debt discount and deferred financing costs                         242,628             234,837
         Loss on disposal of fixed assets                                                    11,248                  --
         Amortization of advertising cost                                                        --              24,803
         Stock options issued for services                                                       --               2,500
         Changes in operating assets and liabilities:
              Increase in accounts receivable                                              (372,167)           (153,015)
              (Increase) decrease in inventories                                           (135,997)             80,614
              Decrease in advances to contract manufacturer                                 137,575             174,449
              (Increase) decrease in prepaid expenses                                         3,341             (10,378)
              Increase in other assets                                                           --             (19,971)
              Increase in accounts payable                                                  399,731             169,465
              Increase in accrued interest                                                  402,827             381,682
              Increase (decrease) in accrued expenses                                       (29,412)             19,829
              Increase in deferred compensation                                             240,000             240,000
                                                                                        -----------         -----------
                  Net cash used in operating activities                                    (860,990)           (417,765)
                                                                                        -----------         -----------

Cash flows from investing activities-payment for capital expenditures                       (15,817)            (69,691)
                                                                                        -----------         -----------

Cash flows from financing activities:
     Expenses relating to registering shares                                                (22,500)                 --
     Proceeds from note payable - officer/stockholder                                       180,537                  --
     Payments of note payable - officer/stockholder                                         (72,322)                 --
     Proceeds from issuance of notes payable                                                900,000             525,000
     Payments for deferred financing costs                                                  (22,721)            (40,538)
                                                                                        -----------         -----------

                  Net cash provided by financing activities                                 962,994             484,462
                                                                                        -----------         -----------

Net INCREASE (DECREASE) in cash                                                              86,187              (2,994)
Cash, beginning of period                                                                     9,683              15,742
                                                                                        -----------         -----------
Cash, end of period                                                                     $    95,870         $    12,748
                                                                                        ===========         ===========
</TABLE>

See Notes to Condensed Consolidated Financial Statements.


                                       6
<PAGE>

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

                  NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (Unaudited)

Supplemental schedule of noncash financing activities:

In September 2003, the Company granted warrants to purchase 15,000 shares of
common stock (with an estimated fair value of $10,400) in connection with a
$50,000 credit facility provided by an existing investor. This resulted in an
initial increase to debt discount and to additional paid-in capital.

During the nine months ended September 30, 2003, pursuant to the 6%/12%
promissory note agreements, the Company converted $206,989 of accrued interest
into additional principal.

On September 30, 2003, in consideration for payment of $5,014,267 of aggregate
debt and interest, the Company issued 4,939,256 shares of common stock and
$25,365 face amount of 8% cumulative convertible preferred stock.

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

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

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

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

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

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

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

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

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


                                       7
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1 - Summary of accounting policies:

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

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

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

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

Note 2 - Basis of presentation:

      The accompanying condensed consolidated financial statements have been
      prepared assuming Milestone will continue as a going concern. However, as
      shown in the accompanying condensed consolidated financial statements,
      Milestone incurred net losses of approximately $1,787,000 and $1,604,000
      and negative cash flows from operating activities of $860,990 and $417,765
      during the nine months ended September 30, 2003 and 2002, respectively. As
      a result, Milestone had a cash balance of approximately $96,000, a working
      capital deficiency of approximately $1,449,000 and a stockholders'
      deficiency of approximately $2,877,000 as of September 30, 2003. These
      matters had raise substantial doubt about Milestone's ability to continue
      as a going concern. Management believes that its initial concerns about
      the Company's ability to continue as a going concern were alleviated
      through its continuing efforts to reduce operating overhead, its
      subsequent satisfaction of a substantial portion of its outstanding
      obligations, the utilization of its equity facility and the introduction
      of new products.

      Nevertheless, management believes that it is probable that Milestone will
      continue to incur losses and negative cash flows from operating activities
      through at least September 30, 2004 and that the Company will need to
      obtain additional equity or debt financing, as well as to continue its
      ability to defer its obligations, to sustain its operations until it can
      expand its customer base and achieve profitability.


                                       8
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Reduction of operating overhead:

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

            o     Commencing in 2001 and continuing through 2003, the Company
                  reconfigured its sales force. The Company went from
                  maintaining a large internal sales force to utilizing
                  independent sales representatives and distributors.

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

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

Restructuring Liabilities and Proforma Impact:

      On September 30, 2003, the Company satisfied approximately $5,014,000 of
      secured debt including interest, through the issuance of 4,939,256 shares
      of Common Stock and $25,365 face amount of 8% cumulative convertible
      preferred stock. In addition, during October and November 2003, the
      Company took the following additional steps to restructure its liabilities
      and raise equity.

            o     On October 31, 2003, the Company issued 306,585 shares of
                  common stock to certain of its principal vendors having a fair
                  value of approximately $502,800, in satisfaction of trade
                  payables and future services in the aggregate amount of
                  $502,800.

            o     The Company has agreed to issue 282,982 shares of common stock
                  having a fair value of $329,572 in satisfaction of $329,572 of
                  deferred financing costs incurred in extending certain of its
                  outstanding loans.

            o     The Company issued 101,829 shares of common stock upon the
                  receipt of approximately $189,000 upon exercising its rights
                  to draw upon a private equity put facility.

            o     The Company issued 7,000 shares of its common stock upon the
                  exercise of options by an employee and the receipt of $7,750.

            o     Additionally, the Company reached agreements with a major
                  investor and the Company's chairman and chief executive
                  officer to satisfy in the aggregate, an approximate $1,961,000
                  of debt, accrued interest and deferred compensation through
                  the issuance of securities at fair value at the later of (i)
                  the effective date of a public offering or (ii) January 2,
                  2004.

      These transactions have had or will have a significant impact on the
      Company's net worth. Presented below on a proforma basis is selected
      financial data, which gives effect to the aforementioned transactions as
      if they occurred on September 30, 2003.


                                        9
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                September 30, 2003
                                                                ------------------

                                                           Actual                Proforma
                                                           ------                --------

                                                                  (in thousands)
<S>                                                      <C>                       <C>
              Total current assets                         1,275                   1,643
              Total current liabilities                    2,724                   1,301
              Working capital (deficiency)               (1,449)                     342
              Total liabilities                            4,391                   1,768
              Total stockholders equity (deficiency)     (2,877)                     114
</TABLE>

Additional Resources:

      In April 2003, the Company received an additional $900,000 8% line of
      credit from a major investor which is scheduled to mature on January 1,
      2005. As of September 30, 2003, $600,000 was outstanding on the
      aforementioned line of credit.

Equity Put Facility:

      During October 2003 and through November 4, 2003, Milestone exercised its
      right to draw upon a private equity facility. In exchange of net proceeds
      of $189,440 the Company issued 101,829 shares of common stock. The put
      facility was arranged in January 2001 under the terms of a three-year
      private equity line agreement with Hillgreen Investments Limited
      ("Hillgreen"), a British Virgin Islands corporation. Hillgreen is
      obligated to purchase, subject to the fulfillment of specified conditions,
      up to 2,100,000 shares of Milestone's common stock. Hillgreen has
      allocated $20,000,000 to fund its purchase obligations. The transaction
      was arranged by Jesup & Lamont Securities Corporation, a New York based
      investment banking firm. Milestone's right to draw upon this facility is
      subject to a number of limitations and conditions, including a limitation
      on the amounts sold to Hillgreen within specified periods. Subject to
      these and other conditions and limitations, Milestone will have full
      control over the timing of any financing under the equity line and is
      under no obligation to sell any shares to Hillgreen. All shares that are
      sold are priced at 87.5% of the volume weighted average market price of
      Milestone common stock during a fixed period prior to the sale. Milestone
      has discretion to establish a floor price below which shares will not be
      sold by Milestone to Hillgreen.

Equity Offering:

      On November 10, 2003, the Company filed with the Securities Exchange
      Commission a registration statement on Form S-2 (the "Registration
      Statement"). The Registration Statement covers the sale of units of common
      stock and warrants for an aggregate firm commitment gross offering price
      of $8,000,000 to $10,000,000. The warrants included in the units are
      exercisable at any time after they become separately tradable until their
      expiration date, five years after the date of the closing of the offering
      of an exercise price equal to 150% of the closing market price of our
      common stock on the pricing date of this offering. Some or all of the
      warrants may be redeemed by us at a price of $0.01 per warrant, by giving
      not less than 30 days notice to the holders of the warrants, which the
      Company may do at any time, beginning 6 months from the effective date of
      this offering after the closing price for the Company's common stock on
      the principal exchange on which it trades (i.e. AMEX) has equaled or
      exceeded 200% of the price of the Company's common stock on the effective
      date of this offering. The common stock included in the units and the
      warrants will trade only as a unit for 30 days following the closing date
      of the offering, unless the underwriter determines that separate trading
      should occur earlier.


                                       10
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

      After that date, the common stock included in the units and the warrants
      will trade separately. The size of the offering, the number of units to be
      sold, the price per unit, the securities included in the units and the
      exercise price of the warrants are all subject to change.

      As currently contemplated, the gross proceeds of an $8,000,000 offering
      are expected to yield net proceeds, of $6,500,000 after taking into
      account underwriting discounts and commissions and estimated offering
      expenses. As set forth in the Registration Statement the net proceeds of
      the offering will be used primarily to expand and support sales and
      marketing efforts for CompuDent in the United States, including new
      marketing and advertising campaigns, support the launch of the recently
      announced SafetyWand product line, expand international sales efforts and
      develop commercial models of products using other new subcutaneous
      injection technology. We will retain broad discretion in the allocation of
      the net proceeds within the categories set forth above. The amounts
      actually expended within these categories may vary significantly and will
      depend on a number of factors, including our rate of revenue growth, cash
      generated by operations, evolving business needs and other factors. There
      are no assurances that the Company will be successful in raising the
      aforementioned amount of capital or any other amount.

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

Note 3 - Loss per share:

      The rights of the Company's preferred and common stockholders are
      substantially equivalent. The Company has included the 25,365 outstanding
      preferred shares from the date of issuance in the weighted average number
      of shares outstanding in the computation of basic loss per share for the
      three and nine months ended September 30, 2002 and 2003, in accordance
      with the "two class" method of computing earnings (loss) per share.

      Options and warrants to purchase 3,300,814 and 4,753,355 shares of common
      stock were outstanding as of September 30, 2003 and 2002, respectively,
      but were not included in the computation of diluted loss per share because
      the effect would have been anti-dilutive.

Note 4 - Significant Customer:

      The Company had one foreign customer who accounted for approximately 22.6%
      and 25.3%, respectively, of its net sales for the three and nine months
      ended September 30, 2003 and approximately 19.8% and 17.9%, respectively,
      for the three and nine months ended September 30, 2002. At September 30,
      2003, receivables from this customer were approximately 70% of the
      Company's total accounts receivable.

Note 5 - Notes payable to officer/stockholder:

      Notes payable to officer/stockholder represent obligations payable to the
      Company's Chief Executive Officer ("CEO"), consisting of (i) $200,000 note
      payable, with interest payable at 9% per annum and having an original due
      date of January 2, 2003, (ii) $100,000 line of credit with interest
      payable at 6% per annum having an original due date of April 2, 2003, and
      (iii) $108,215 of notes payable on demand with interest payable at 6% per
      annum.

      The $108,215 arose when the Company's CEO provided the Company with a
      $57,322 short term loan on January 17, 2003 for the express purpose of
      purchasing Wand(R) handpieces from the Company's supplier. The Company
      repaid the loan in full by February 7, 2003. On February 12, 2003, April 7
      and September 30, 2003, the Company's CEO provided additional demand loans
      of $38,215, $35,000 and $50,000, respectively. The loans for $38,215 and
      $35,000 were provided to fund operations. The loan for $50,000 was
      provided for the


                                       11
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

      purpose of covering expenses relating to the further exploration of equity
      financing alternatives. As of September 30, 2003 and November 4, 2003,
      $108,215 remains outstanding.

      On April 1, 2003, the $200,000 and $100,000 notes were extended to April
      1, 2004. On April 15, 2003, $32,000 of the remaining $108,215 of notes
      payable was extended to January 2, 2005.

Note 6- Notes payable:

      On September 30, 2003, the Company satisfied $5,014,014 of secured debt
      obligations including interest through the issuance of 4,939,256 shares of
      its Common stock and 25,365 of its Preferred Stock. These obligations
      consisted of the following:

            o     6%/12% Promissory Notes with an aggregate value of $2,822,959

            o     8% Promissory Notes with an aggregate value of $1,604,315

            o     $500,000 line of credit and $86,740 of accrued interest

      As of September 30, 2003, short term notes payable, net of a $9,955 debt
      discount,consist of the following:

      $329,572 of additional consideration given to the original noteholder of
      the 6%/12% of promissory notes when they agreed to extend the obligations
      on April 15, 2002 until July 1, 2003. The $329,572 of the additional
      consideration was subsequently satisfied through the issuance of 282,982
      shares of the Company's Common stock during October and November 2003
      valued at $1.16 per share, the fair value.

            o     $500,000 borrowed under the $1,000,000 6% credit facility.

            o     $600,000 borrowed under the $900,000 8% credit facility.

      Agreements reached in October 2003 provide for the satisfaction of the
      obligations through the issuance of equity securities by January 2004.
      (See Note 2)

      Long term notes payables consist of $100,000 in 6% promissory notes and
      $500,000 of the 8% promissory note.

      Descriptions of the above obligations follow.

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

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

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

                  Subsequently, on April 15, 2002, the holders additionally
                  agreed to extend the promissory notes to July 1, 2003 and to
                  lower the interest rate to 6% if paid in cash or to 12% if
                  paid in common stock. In connection with the extension, the
                  Company recorded $16,215 in deferred financing charges
                  relating to


                                       12
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                  professional fees and $140,203 of deferred financing costs
                  relating to consideration to the noteholders valued at $120 of
                  the Company's common stock for each $1,000 face amount
                  outstanding at maturity which increased the aggregate carry
                  value of the notes by $140,203. The Company was accruing
                  interest expense at 12%. These deferred financing costs were
                  amortized through July 1, 2003. These obligations were
                  satisfied as described above through the issuance of 1,171,121
                  shares of common stock and 25,365 of convertible preferred
                  stock. To date and subsequent to September 30, 2003, the
                  Company issued 120,785 shares of the common stock in
                  satisfaction of the $140,212 of deferred financing costs.

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

            For the nine months ended September 30, 2003 and 2002, the Company
            converted into principal, accrued interest of $206,989 and $171,785,
            respectively.

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

            These obligations were satisfied as described above through the
            issuance of 1,598,773 shares of Common stock. To date and subsequent
            to September 30, 2003, the Company issued 162,197 shares of the
            Common stock in satisfaction of the $189,360 of deferred financing
            costs.

      (B) 8% Promissory Notes

      The 8% promissory notes consist of the following:

            On July 31, 2000, the Company established a $1,000,000 credit
            facility with a major existing investor. Initially, $500,000 was
            borrowed under the line, which was due on September 30, 2003. In
            December 2000, and January 2001, the Company borrowed under the
            credit facility an additional $400,000 and $100,000, respectively,
            due on December 31, 2003. In connection with the initial $500,000,
            the investor received five-year warrants to purchase 70,000 shares
            of the Company's common stock, exercisable at $3.00 per share. In
            connection with the $400,000, the investor received five-year
            warrants to purchase 80,000 shares of the Company's common stock
            exercisable at $1.25 per share. In connection with the $100,000, the
            investor received five-year warrants to purchase 20,000 shares of
            the Company's common stock at $1.25 per share. On April 12, 2002,
            the investor agreed to extend the maturity date of the $500,000 to
            August 1, 2003. Accordingly, in connection with the extension, the
            unamortized debt discount is being amortized to August 1, 2003. On
            April 15, 2003, the investor agreed to extend the maturity date of
            the $500,000 and interest originally due December 31, 2003 to
            January 2, 2005. On July 1, 2003, the investor agreed to extend the
            maturity date of notes due August 1, 2003 until September 20, 2003.
            At the option of the Company, this $500,000 can be convertible into
            common stock. On September 30, 2003, the Company satisfied $500,000
            of the obligation and $120,644 of related interest through the
            issuance of 614,499 shares of the Company Common stock.


                                       13
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

            During 2002 and through February 2003, the Company issued a total of
            $1,385,000 promissory notes to an existing investor maturing on
            September 30, 2003. At the option of the company, the notes, bear
            interest at 8% if paid in cash and 10% if paid in stock

            During the nine months ended September 30, 2003, the Company
            borrowed $600,000 under an $800,000, 8% credit facility from an
            existing investor. In October 2003, agreements were reached
            providing for the issuance of equity securities in satisfaction of
            these obligations and related interest.

            On September 30, 2003, the Company issued 973,932 shares of its
            common stock in consideration for payment of these promissory notes
            including interest.

      (C) $500,000 Line of Credit

            On March 9, 2001 the Company obtained from a major existing
            investor, a 10% $500,000 line of credit, which was to mature on
            August 31, 2002. Additionally, the Company pays a 2% facility fee on
            the line outstanding balance.

            In connection with obtaining the line of credit, the lender received
            warrants to purchase 100,000 shares of common stock at an exercise
            price of $1.10. The estimated fair value of the warrants, which
            amounted to $40,000 was recorded as a debt discount. In addition,
            the Company incurred deferred financing fees of $28,384 which was
            being amortized to August 31, 2002. On April 12, 2002 the investor
            agreed to extend the line of credit and payment for interest to
            August 1, 2003. Furthermore in July 2003, the investor agreed to
            extend the line of credit and payment for interest until September
            30, 2003. In connection with each extension, amortization of
            unamortized debt discount and deferred financing costs were also
            extended. These obligations were satisfied as described above
            through the issuance of 580,931 shares of Common Stock.

      (D) 6% Convertible Promissory Notes

            During each of June 2003 and September 2003, the Company issued a
            $50,000 promissory note to existing investors. The June note bears
            interest at 6% and matures on November 27, 2004. At the option of
            the Company, the principal and interest are payable on the maturity
            date in common stock at a rate of one share of common stock for
            every $.312 of indebtedness. Additionally, Milestone granted the
            investor warrants to purchase 160,256 of common stock at a per share
            price of $.52 exercisable at any time or from time to time during
            the period June 4, 2003 through June 3, 2005. This resulted in an
            initial increase to debt discount and to additional paid-in capital
            of $14,423 equal to the estimated fair market value of the warrants.
            The note dated September 25, 2003 bears interest at 6% and matures
            on March 24, 2005. At the option of the Company, the principal and
            interest are payable on the maturity date in common stock at a rate
            of one share of common stock for every $1.10 of indebtedness.
            Additionally, Milestone granted the investor warrants to purchase
            15,000 of common stock at a per share price of $2.00 with an
            estimate fair value of $14,423 at any time or from time to time
            during the period of June 4, 2003 through June 5, 2005. This
            resulted in an initial increase to debt discount and to additional
            paid-in capital.

Note 7- Accounts Payable - long term

            In addition to the $160,000 of trade payables which had been
            previously extended to January 2005, the Company on October 3, 2003,
            reached agreements to satisfy $502,800 of trade payables including
            $187,000 of services not yet completed or billed through the
            issuance of 306,855 shares of Common stock valued at $1.64 per
            share.


                                       14
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 8- Legal proceedings

            On September 10, 2002, a former distributor, Henry Schein, Inc.,
            sued Milestone in the Supreme Court of the State of New York for
            $110,851 claimed to be due them for returned merchandise. Milestone
            denies any liability. The parties are currently engaged in discovery
            proceedings. Milestone believes it has meritorious defense to this
            complaint based, in part, on its position that the plaintiff had no
            right to return the goods. On May 9, 2003, Milestone was served with
            a Breach of Contract Complaint. In the complaint, the plaintiff,
            Korman/Lender Management (landlord of the facility in Deerfield, IL)
            seeks damages of $17,755 plus costs, including attorney's fees,
            interest and continuing rental obligation. The Company is scheduled
            to appear at an arbitration hearing in late November 2003.

Note 9 - Employee Stock Option Plan

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

<TABLE>
<CAPTION>
                                                                Three Months Ended                     Nine Months Ended
                                                                   September 30                           September 30
                                                              2003              2002                2003                2002
                                                              ----              ----                ----                ----
<S>                                                       <C>               <C>                 <C>                 <C>
            Net loss, as reported                         $    (628,580)    $    (581,831)      $  (1,787,382)      $  (1,604,252)
            Deduct: Total stock-based employee
            compensation expenses determined under
            fair value based method for all awards
                                                                (56,154)         (123,121)           (168,462)           (369,365)
                                                          -------------     -------------       -------------       -------------
            Net loss, pro forma
                                                          $    (684,734)    $    (704,952)      $  (1,955,844)      $  (1,973,617)
                                                          =============     =============       =============       =============
            Loss per share: Basic and diluted
                 As reported
                 Basic-pro forma                          $        (.05)    $        (.05)      $        (.14)      $        (.13)
                                                          =============     =============       =============       =============
                                                          $        (.05)    $        (.06)      $        (.15)      $        (.16)
                                                          =============     =============       =============       =============
</TABLE>

Note 10 - Closing of Deerfield, IL Facility

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


                                       15
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 11 - Subsequent Events

      Potential Reverse Stock Split

            The Board of Directors adapted a resolution, subject to
            shareholders' approval, of an amendment to the Company's Certificate
            of Incorporation to effect a reverse stock split of its common
            stock. The ratio would be no greater than one-for-ten, at the sole
            discretion of the Company's board of directors, in connection with
            an underwritten public offering by the Company. The principal
            purpose of the reverse stock split is to facilitate the public
            offering, which, we believe, is necessary to maintain our listing on
            the American Stock Exchange. In order to maintain the listing, we
            must, among other requirements, maintain stockholders' equity of at
            least $6 million.


                                       16
<PAGE>

ITEM 2. Management's Discussion and Analysis or Plan of Operations

Overview

      We have generated most of our revenues during the nine months ended
      September 30, 2002 and 2003 through sales of our CompuDent(TM) system and
      The Wand(R) disposable handpiece used with that system. During this
      period, handpiece sales have reflected a growing base of new customers for
      our systems internationally and more intensive use of their systems by a
      relatively stagnant base of customers domestically. Though we have
      continued to sell new systems domestically, a large part of our domestic
      sales during this period represented the sale of up-graded units or
      additional units to our existing customer base. Our limited domestic sale
      of new systems reflects our limited sales and marketing efforts as a
      result of cash constraints. The following table shows a breakdown of our
      revenues, domestically and internationally, by product category, and the
      percentage of total revenue by each product category.

<TABLE>
<CAPTION>
                                    Three Months Ended September 30,                         Six Months Ended September 30,
                                    --------------------------------                         ------------------------------

                                     2003                       2002                        2003                       2002
                           -----------------------     ---------------------     ------------------------     --------------------
<S>                        <C>                <C>      <C>              <C>      <C>                 <C>      <C>             <C>
         Domestic

CompuDent                  $  157,660         23.2%    $  229,770       29.1%    $  524,566          25.4%    $  799,671      32.8%
Handpieces                    481,486         71.0%       500,370       63.3%     1,398,347          67.6%     1,461,607      59.9%
Other                          39,432          5.8%        59,743        7.6%       144,384           7.0%       176,923       7.3%
                           ----------    ---------     ----------   --------     ----------    ----------     ----------  --------
Total Domestic             $  678,578        100.0%    $  789,883      100.0%    $2,067,297         100.0%    $2,438,201     100.0%
                           ==========    =========     ==========   ========     ==========    ==========     ==========  ========

    International

CompuDent                  $  163,000         56.0%    $  123,640       50.6%    $  574,225          55.4%    $  436,228      56.1%
Handpieces                    127,980         44.0%       118,983       48.7%       460,152          44.4%       337,714      43.4%
Other                               0          0.0%         1,684        0.7%         2,574           0.2%         3,764       0.5%
                           ----------    ---------     ----------   --------     ----------    ----------     ----------  --------
Total International        $  290,980        100.0%    $  244,307      100.0%    $1,036,951         100.0%    $  777,706     100.0%
                           ==========    =========     ==========   ========     ==========    ==========     ==========  ========

Domestic/International
        Analysis

Domestic                   $  678,578         70.0%    $  789,883       76.4     $2,067,297          66.6     $2,438,201      75.8
International                 290,980         30.0%       244,307       23.6      1,036,951          33.4        777,706      24.2
                           ----------    ---------     ----------   --------     ----------    ----------     ----------  --------
                           $  969,558        100.0%    $1,034,190      100.0%    $3,104,248         100.0%    $3,215,907     100.0%
                           ==========    =========     ==========   ========     ==========    ==========     ==========  ========
</TABLE>

      We have earned relatively high gross profits on our revenues, 50% and 47%
      during the three months ended September 30, 2002 and 2003, respectively
      and 53% and 50% during the nine-month periods ended September 30, 2002 and
      2003, respectively. However, revenue levels have been too low to support
      our overhead, research and development expense and interest on our debt.
      Thus substantial, though declining, losses have been reported for each of
      those periods. To address this problem we have taken steps to cut our
      overhead, increase sales and reduce our interest expense by issuing equity
      securities in payment of a substantial part of our debt.

      First, we took the following steps to reduce our operating overhead and
      improve our utilization of cash:

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

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

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


                                       17
<PAGE>

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

      Next, we took steps to reduce our debt burden. We cut the interest rate on
      our Senior Secured and Secured Notes (after negotiation with our note
      holders) from 20% to 12% (6% if we paid interest in cash) and extended the
      previously extended maturity date until July and August 2003. In September
      2003, we satisfied $5,014,014 of debt by issuing 4,939,256 shares of
      common stock and 25,365 shares of convertible preferred stock. On October
      31, 2003, we agreed with vendors to satisfy approximately $503,000 of
      trade payable by issuing 306,585 shares of common stock. In October we
      also reached agreement to satisfy, on the later of January 2, 2004 or the
      effective date of the proposed public offering, an additional $1,960,996
      of debt, accrued interest and accrued compensation through issuance of
      equity securities.

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

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

            o     increased its base price to new customers to provide
                  sufficient gross profit to recruit and adequately compensate
                  its sales force;

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

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

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

Summary of Significant Accounting Policies

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


                                       18
<PAGE>

      making judgments about the carrying values of assets and liabilities that
      are not readily apparent from other sources. Actual results may differ
      from those estimates under different assumptions or conditions.

      Inventory

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

      Impairment of Long-Lived Assets

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

      Revenue Recognition

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

Results of Operations

      Milestone's results from operations for the nine months ended September
      30, 2003, reflect continued growth in sales to foreign distributors,
      training and further expansion of its domestic independent sales force,
      and finalizing preparations to distribute two newly developed products
      while seeking additional financing.

      The net loss for the nine months ended September 30, 2003 was
      approximately $183,000 greater than the loss reported for the nine months
      ended September 30, 2002. A decline in sales volume and gross profit
      percentages, coupled with increases in research and development expenses
      and interest expense were the primary factors of this increase in net
      loss.

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

<TABLE>
<CAPTION>
                                                     3 months                         9 months       9 months
                                                       ended       3 months ended       ended          ended
                                                      9/30/03         9/30/02          9/30/03        9/30/02
<S>                                                    <C>            <C>               <C>            <C>
           Net Sales                                   100.0%         100.0%            100.0%         100.0%
           Cost of sales                               -53.0%         -50.0%            -50.3%         -46.6%
           Gross profit                                 47.0%          50.0%             49.7%          53.4%
           Selling, general and
             administrative                            -91.3%         -83.6%           -79.50%        -83.01%
           Depreciation                                 -0.9%          -1.3%             -0.9%          -1.3%
           Closing of Deerfield, IL facility            -1.4%           0.0%             -2.5%           0.0%
           Research and development                     -3.0%          -1.8%             -3.6%          -2.0%
           Loss from operations                        -49.5%         -36.7%            -36.8%         -33.0%
           Other income                                  0.0%           2.3%              0.0%           2.2%
           Interest, net                               -15.5%         -21.9%            -20.8%         -19.2%
           Net loss                                    -65.0%         -56.3%            -57.6%         -49.9%
</TABLE>


                                       19
<PAGE>

Statement of Operations

      Three months ended September 30, 2003 compared to three months ended
                               September 30, 2002

      Net sales for the three months ended September 30, 2003 and 2002 were
      $966,591 and $1,034,190 respectively. The $67,599 or 6.5% decrease is
      primarily related to an approximate $82,000 aggregate decrease in
      CompuDent(R) and CompuMed(R)sales domestically. Also, revenue from Wand(R)
      handpieces sales in the United States decreased by $19,000. The decrease
      in Wand(R) handpiece sales is the result of changing the primary vendor of
      the Wand(R) handpiece, resulting in inconsistent inventory levels.
      Subsequently, the transition issues have been resolved and are resulting
      in improved supply chain management.

      Cost of sales for the three months ended September 30, 2003 and 2002 were
      $511,867 and $517,292 respectively. The $5,425 decrease is attributable
      primarily to lower sales volume.

      For the three months ended September 30, 2003, Milestone generated a gross
      profit of $454,724 or 47% as compared to a gross profit of $516,898 or 50%
      for the three months ended September 30, 2002. The decrease in gross
      profit percentage is primarily attributable to increased sales to foreign
      distributors. Sales to foreign distributors are of higher volume but at a
      reduced margin.

      Selling, general and administrative expenses for the three months ended
      September 30, 2003 and 2002 were $891,322 and $877,441 respectively. The
      $13,881 increase is attributable primarily to an approximate $28,000
      increase in professional fees partially offset by a $19,000 decrease in
      expenses associated with the sale and marketing of the Wand(R) technology.
      An approximate $50,000 expense associated with the independent sales
      representative start up costs, was primarily offset by a commensurate
      amount of commissions earned during the similar period in the previous
      year.

      Milestone incurred costs totaling $13,150 relating to the rent expense for
      its closed facility in Deerfield, IL.

      Research and development expenses for the three months ended September 30,
      2003 and 2002 were $29,066 and $18,549, respectively. These costs are
      associated with the development of Milestone's SafetyWand(TM), which
      incorporates safety engineered injury sharps protection, mandated by the
      Federal Needlestick Safety and Prevention Act of 2000.

      The loss from operations for the three months ended September 30, 2003 and
      2002 were $478,814 and $379,092, respectively. The $99,722 increase in
      loss from operations is explained above.

      Milestone generated $24,000 in other income for the three months ended
      September 30, 2002 as a result of a consulting contract which expired in
      October 2002.

      Interest expense of $149,766 was incurred for the three months ended
      September 30, 2003 as compared to $226,739 for the three months ended
      September 30, 2002. The decrease is attributable to an approximate $76,000
      decrease in amortization of aggregate debt discount and deferred financing
      costs.

      The net loss for the three months ended September 30, 2003 was $628,580 as
      compared to a net loss of $581,831 for the three months ended September
      30, 2002. The $46,749 increase in net loss is explained above.


                                       20
<PAGE>

       Nine months ended September 30, 2003 compared to nine months ended
                               September 30, 2002

      Net sales for the nine months ended September 30, 2003 and 2002 were
      $3,101,281 and $3,215,907, respectively. The $114,626 or 3.6% decrease is
      primarily related to an approximate $175,000 aggregate in CompuDent(R) and
      CompuMed(R)sales, domestically and a $63,000 decrease in domestic sales of
      the Wand(R) handpieces. These decreases were partially offset by a
      $122,000 increase in foreign sales of the Wand(R) handpiece. The decrease
      in Wand(R) handpiece sales is the result of changing the primary vendor of
      the Wand(R) handpiece, resulting in inconsistent inventory levels.
      Subsequently, the transition issues have been resolved and are resulting
      in improved supply chain management.

      Cost of sales for the nine months ended September 30, 2003 and 2002 were
      $1,560,288 and $1,499,063 respectively. The $61,225 increase is
      attributable primarily to higher sales volume to foreign distributors.

      For the nine months ended September 30, 2003, Milestone generated a gross
      profit of $1,540,993 or 49.7% as compared to a gross profit of $1,716,844
      or 53.4% for the nine months ended September 30, 2002. The decrease in
      gross profit percentage is primarily attributable to increased sales to
      foreign distributors. Sales to foreign distributors are of higher volume
      but at a reduced margin.

      Selling, general and administrative expenses for the nine months ended
      September 30, 2003 and 2002 were $2,491,737 and $2,712,649 respectively.
      The $220,912 decrease is attributable primarily to an approximate $241,000
      decrease in expenses associated with the sale and marketing of the Wand(R)
      technology. An approximate $63,000 expense associated with the independent
      sales representative start up costs, was primarily offset by a
      commensurate amount of commissions earned during the similar period in the
      previous year.

      Milestone incurred costs totaling $79,023 relating to the closure of its
      Deerfield, IL facility.

      Research and development expenses for the nine months ended September 30,
      2003 and 2002 were $112,158 and $63,928 respectively. These costs are
      associated with the development of Milestone's SafetyWand(TM).

      The loss from operations for the nine months ended September 30, 2003 and
      2002 were $1,141,925 and $1,059,733 respectively. The $82,192 increase in
      loss from operations is explained above.

      Milestone generated $72,000 in income for the nine months ended September
      30, 2002 as a result of a consulting contract which expired in October
      2002.

      Interest expense of $645,457 was incurred for the nine months ended
      September 30, 2003 as compared to $616,519 for the nine months ended
      September 30, 2002. The increase is attributable to higher average
      borrowings in 2003.

      The net loss for the nine months ended September 30, 2003 was $1,787,382
      as compared to a net loss of $1,604,252 for the nine months ended
      September 30, 2002. The $183,130 increase in net loss is explained above.

Liquidity and Capital Resources

      The accompanying condensed consolidated financial statements have been
      prepared assuming Milestone will continue as a going concern. However, as
      shown in the accompanying condensed consolidated financial statements,
      Milestone incurred net losses of approximately $1,787,000 and $1,604,000
      and negative cash flows from operating activities of $861,000 and $418,000
      during the nine months ended September 30, 2003 and 2002, respectively. As
      a result, Milestone had a cash balance of approximately $96,000, a working
      capital deficiency of approximately $1,449,000 and a stockholders'
      deficiency of approximately $2,877,000 as of September 30, 2003. These
      matters raised substantial doubt about Milestone's ability to continue as
      a going


                                       21
<PAGE>

      concern. Management believes that its initial concerns about the Company's
      ability to continue as a going concern were alleviated through the
      subsequent satisfaction of a substantial portion of its outstanding
      obligations, the introduction of new products and continuing efforts to
      reduce operating overhead. Nevertheless, management believes that it is
      probable that Milestone will continue to incur losses and negative cash
      flows from operating activities through at least September 30, 2004.

Restructuring Liabilities and Proforma Impact:

      On September 30, 2003, the Company satisfied approximately $5,014,000 of
      secured debt including interest, through the issuance of 4,939,256 shares
      of Common Stock and $25,365 face amount of 8% cumulative convertible
      preferred stock. In addition, during October and November 2003, the
      Company took the following additional steps to restructure its liabilities
      and raise equity.

            o     On October 31, 2003, the Company issued 306,585 shares of
                  common stock to certain of its principal vendors having a fair
                  value of approximately $502,800, in satisfaction of trade
                  payables and future services in the aggregate amount of
                  $502,800.

            o     The Company has agreed to issue 282,982 shares of common stock
                  having a fair value of $329,572 in satisfaction of $329,572 of
                  deferred financing costs incurred in extending certain of its
                  outstanding loans.

            o     The Company issued 101,829 shares of common stock upon the
                  receipt of approximately $189,000 upon exercising its rights
                  to draw upon a private equity put facility.

            o     The Company issued 7,000 shares of its common stock upon the
                  receipt of $7,750 when an employee exercised his stock
                  options.

            o     Additionally, the Company reached agreements with a major
                  investor and the Company's chairman and chief executive
                  officer to satisfy in the aggregate, an approximate $1,961,000
                  of debt, accrued interest compensation through the issuance of
                  securities at fair value at the later of (i) the effective
                  date of a public offering or (ii) January 2, 2004.

      These transactions had or will have a significant impact on the Company's
      net worth. Presented below on a proforma basis is selected financial data,
      which gives effect to the aforementioned transactions as if they occurred
      on September 30, 2003.

<TABLE>
<CAPTION>
                                                                  September 30, 2003
                                                                  ------------------

                                                             Actual               Proforma
                                                             ------               --------

                                                                    (in thousands)
<S>                                                          <C>                     <C>
           Total current assets                                1,275               1,643

           Total current liabilities                           2,724               1,301

           Working capital (deficiency)                      (1,449)                 342

           Total liabilities                                   4,391               1,768

           Total stockholders equity (deficiency)            (2,877)                 114
</TABLE>

Additional Resources:

      In April 2003, the Company received an additional $900,000 8% line of
      credit from a major investor which is scheduled to mature on January 1,
      2005, unless extended. As of September 30, 2003, $600,000 was outstanding
      on the aforementioned line of credit.


                                       22
<PAGE>

Equity Put Facility

      During October 2003 and through November 4, 2003, Milestone exercised its
      right to draw upon a private equity facility. In exchange of net proceeds
      of $189,440 the Company issued 101,829 shares of common stock. The put
      facility was arranged in January 2001 under the terms of a three-year
      private equity line agreement with Hillgreen Investments Limited
      ("Hillgreen"), a British Virgin Islands corporation. Hillgreen is
      obligated to purchase, subject to the fulfillment of specified conditions,
      up to 2,100,000 shares of Milestone's common stock. Hillgreen has
      allocated $20,000,000 to fund its purchase obligations. The transaction
      was arranged by Jesup & Lamont Securities Corporation, a New York based
      investment banking firm. Milestone's right to draw upon this facility is
      subject to a number of limitations and conditions, including a limitation
      on the amounts sold to Hillgreen within specified periods. Subject to
      these and other conditions and limitations, Milestone will have full
      control over the timing of any financing under the equity line and is
      under no obligation to sell any shares to Hillgreen. All shares that are
      sold are priced at 87.5% of the volume weighted average market price of
      Milestone common stock during a fixed period prior to the sale. Milestone
      has discretion to establish a floor price below which shares will not be
      sold by Milestone to Hillgreen.

Equity Offering

      On November 10, 2003, we filed with the Securities Exchange Commission a
      registration statement on Form S-2 (the "Registration Statement"). The
      Registration Statement covers the sale of units of common stock and
      warrants for an aggregate firm commitment gross offering price of
      $8,000,000 to $10,000,000. The warrants included in the units are
      exercisable at any time after they become separately tradable until their
      expiration date, five years after the date of the closing of the offering
      of an exercise price equal to 150% of the closing market price of our
      common stock on the pricing date of this offering. Some or all of the
      warrants may be redeemed by us at a price of $0.01 per warrant, by giving
      not less than 30 days notice to the holders of the warrants, which we may
      do at any time, beginning 6 months from the effective date of this
      offering after the closing price for our common stock on the principal
      exchange on which it trades (i.e. AMEX) has equaled or exceeded 200% of
      the price of our common stock on the effective date of this offering. The
      common stock included in the units and the warrants will trade only as a
      unit for 30 days following the closing date of the offering, unless the
      underwriter determines that separate trading should occur earlier.

      As currently contemplated, the gross proceeds of an $8,000,000 offering
      are expected to yield net proceeds, of $6,500,000 after taking into
      account underwriting discounts and commissions and estimated offering
      expenses. As set forth in the Registration Statement the net proceeds of
      the offering will be used primarily to expand and support sales and
      marketing efforts for CompuDent in the United States, including new
      marketing and advertising campaigns, support the launch of the recently
      announced SafetyWand product line, expand international sales efforts and
      develop commercial models of products using other new subcutaneous
      injection technology. We will retain broad discretion in the allocation of
      the net proceeds within the categories set forth above. The amounts
      actually expended within these categories may vary significantly and will
      depend on a number of factors, including our rate of revenue growth, cash
      generated by operations, evolving business needs and other factors. There
      are no assurances that the Company will be successful in raising the
      aforementioned amount of capital or any other amount.

Cash flow results

      For the nine months ended September 30, 2003, the Company's net cash used
      in operating activities was $860,990. This was attributable primarily to a
      net loss of $1,787,382 adjusted for noncash items of $280,494 (of which
      $242,628 was for amortization of debt discount and deferred financing
      costs); a $372,167 increase in accounts receivable; an $135,997 increase
      in inventories; a $137,575 decrease in advances to contract manufacturer;
      a $3,341 decrease in prepaid expenses; an increase in accounts payable of
      $399,731 a $402,827 increase in accrued interest; a $29,412 decrease in
      accrued expenses; and an $240,000 increase in deferred compensation.

      For the nine months ended September 30, 2003, the Company used $15,817 in
      investing activities for capital expenditures.


                                       23
<PAGE>

      For the nine months ended September 30, 2003, the Company generated
      $962,994 from financing activities as it issued promissory notes to
      existing investors totaling $900,000, incurred $108,215 of net borrowings
      from its Chief Executive Officer, recorded $22,721 in deferred financing
      activities and incurred $22,500 in expenses in registering shares.

RECENT ACCOUNTING PRONOUNCEMENT

      In December 2002, SFAS No. 148, "Accounting for Stock-Based
      Compensation-Transition and Disclosure, an Amendment of SFAS No. 132" was
      issued. SFAS No. 148 amends SFAS No. 123, to provide alternative methods
      of transition for a voluntary change to the fair value method of account
      for stock-based employee compensation. In addition, SFAS No. 148 amends
      the disclosure requirements of SFAS No. 123 to require prominent
      disclosures in both annual and interim financial statements about the
      method of accounting for stock-based employee compensation and the effects
      of the method used on reporting results. Milestone adopted SFAS No. 148,
      effective January 1, 2003 and it did not have any material impact on its
      consolidated financial statements.

      In May 2003, SFAS No. 150, "Accounting for Certain Financial Instruments
      with Characteristics of both Liabilities and Equity" was issued. The
      statement requires that an issuer classify financial instruments that are
      with its scope as a liability. Many of those instruments were classified
      as equity under previous guidance. Most of the guidance in SFAS No. 150 is
      effective for all financial instruments entered into or modified after May
      31, 2003, and otherwise effective at the beginning of the first interim
      period beginning after June 15, 2003. We are currently evaluating the
      provisions of the statement, and do not believe that it will have an
      impact on our consolidated financial statements.

OTHER MATTERS - AMERICAN STOCK EXCHANGE

      On May 2, 2002, Milestone received a letter from the American Stock
      Exchange advising that the Company has fallen below the stockholders'
      equity criterion and requesting the submission of a recovery plan
      detailing any actions taken, or planned to be taken within the next 18
      months to bring the Company into compliance. On September10, 2002, the
      Company submitted a detailed recovery plan to the American Stock Exchange
      showing how Milestone expects to achieve stockholder equity of $4,000,000
      by December 31, 2003. In response, Milestone received informal advice from
      the American Stock Exchange that in view of the expected loss in 2002,
      Milestone needed to demonstrate how the Company will achieve $6,000,000 in
      stockholders' equity by the end of 2003. On August 14, 2002, a
      supplemental plan demonstrating how Milestone expects to meet these
      requirements was submitted. On August 23, 2002, the American Stock
      Exchange advised Milestone that they had determined that the plan makes a
      reasonable demonstration of Milestone's ability to regain compliance with
      the continued listing standards by the conclusion of the plan period at
      the end of 2003. Subsequently, Milestone has discussed with American Stock
      Exchange its results from operations and its future expectations as they
      relate to the plan submitted in August 2002. The continued listing of
      Milestone's securities on the American Stock Exchange during this period
      will be subject to periodic reviews by the Exchange. Failure to show
      progress consistent with the plan or to regain compliance by the end of
      the plan period could still result in the Milestone being delisted. In the
      event that Milestone's securities are delisted from the American Stock
      Exchange, trading, if any, in the common stock and warrants would be
      conducted in the over the counter market on the NASD's "OTC Bulletin
      Board." Consequently the liquidity of Milestone securities could be
      impaired, not only in the number of securities which could be bought and
      sold, but also through delays in the timing of transactions, reduction in
      security analysts and new media coverage of Milestone, and lower prices
      for Milestone's securities than might otherwise be obtained.


                                       24
<PAGE>

SUBSEQUENT EVENTS

      Potential Reverse Stock Split

            The Board of Directors adopted a resolution, subject to
            shareholders' approval, of an amendment to the Company's Certificate
            of Incorporation to effect a reverse stock split of its common
            stock. The ratio would be no greater than one-for-ten, at the sole
            discretion of the Company's board of directors, in connection with
            an underwritten public offering by the Company. The principal
            purpose of the reverse stock split is to facilitate the public
            offering, which, we believe, is necessary to maintain our listing on
            the American Stock Exchange. In order to maintain the listing, we
            must, among other requirements, maintain stockholders' equity of at
            least $6 million.


                                       25
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

a) Evaluation of Disclosure Controls and Procedures. Milestone's management,
with the participation of the chief executive officer and the chief financial
officer, carried out an evaluation of the effectiveness of Milestone's
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 (the "Exchange Act") Rules 13a-15(e) and 15-d-15(e)) as of the end of
the period covered by this quarterly report (the "Evaluation Date"). Based upon
that evaluation, the chief executive officer and the chief financial officer
concluded that, as of the Evaluation Date, Milestone's disclosure controls and
procedures are effective, providing them with material information relating to
Milestone as required to be disclosed in the reports Milestone files or submits
under the Exchange Act on a timely basis.

b) Changes in Internal Control over Financial Reporting. There were no changes
in Milestone's internal controls over financial reporting, known to the chief
executive officer or the chief financial officer, that occurred during the
period covered by this report that has materially affected, or is reasonably
likely to materially affect, Milestone's internal control over financial
reporting.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

a) Milestone held its 2003 annual meeting of Stockholders on July 2, 2003. The
following resolutions were adopted by the Stockholders at the meeting:

(i)   Relection of all board members. Present below, are the voters cast for
      each director nominee:

<TABLE>
<CAPTION>
                                                             WITHHOLD
                      NAME                  FOR              AUTHORITY            ABSTAIN
                                            ---              ---------            -------
<S>                                      <C>                 <C>                  <C>
              Leonard Osser              11,378,458                               105,977
              Paul Gregory               11,393,633                               90,798
              Leonard Schiller           11,395,633                               88,798
              Leslie Bernhard            11,385,355                               89,798
              Jeffrey Fuller             11,395,633                               88,798
</TABLE>

(ii)) Authorization of an amendment to the Certificate of Incorporation to
increase the number of authorized shares of common stock from 25,000,000 to
50,000,000.

The results were as follows:

                   FOR                AGAINST                  ABSTAIN
                   ---                -------                  -------

               11,108,736             142,615                   12,767

b) The annual meeting of stockholders was reconvened on July 18, 2003. On this
date, the stockholders approved an additional amendment to the Company's
Certificate of Incorporation to add a new class of 5,000,000 shares of "blank
check" Preferred Stock with such rights, preferences and privileges as will be
determined by the Board of Directors when designating each issue.

The results were as follows:

                   FOR                AGAINST                  ABSTAIN
                   ---                -------                  -------

                7,250,330             218,161                   10,987


                                       26
<PAGE>

                                                                         PART II

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      (a) Exhibits:

            10.32 Debt Settlement Agreement with Leonard Osser and K. Tucker
                  Andersen, dated October 9, 2003.

            31.1  Chief Executive Officer Certification pursuant to section 302
                  of the Sarbanes-Oxley Act of 2002.

            31.2  Chief Financial Officer Certification pursuant to section 302
                  of the Sarbanes-Oxley Act of 2002.

            32.1  Chief Executive Officer Certification pursuant to section 906
                  of the Sarbanes-Oxley Act of 2002.

            32.2  Chief Financial Officer Certification pursuant to section 906
                  of the Sarbanes-Oxley Act of 2002.

      (b) Reports on Form 8-K:

            On July 3rd and July 23rd, 2003, we filed current reports on Form
            8-K, under Item 5.

                                   SIGNATURES

      In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    MILESTONE SCIENTIFIC INC.
                                            Registrant


                                    /s/ Leonard Osser
                                    ------------------------------------
                                    Leonard Osser Chairman and
                                    Chief Executive Officer


                                    /s/ Thomas M. Stuckey
                                    ------------------------------------
                                    Thomas M. Stuckey, Vice President and
                                    Chief Financial Officer

Dated: November 13, 2003


                                       27