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 June 30, 1998

                                       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 0-26284

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

  Delaware                                                      13-3545623
  ------------------------------------------------------------------------
  State or other jurisdiction                             (I.R.S. Employer
  of 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) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

As of August 17, 1998 the Registrant had a total of 8,817,882 shares of Common
Stock, $.001 par value, outstanding.

<PAGE>

Forward looking statements

When used in this Quarterly Report on Form 10-Q, 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>

                                      INDEX

PART I.     FINANCIAL INFORMATION                                           Page

   ITEM 1.  Condensed Consolidated Financial Statements

            Condensed Consolidated Balance Sheets at June 30,
            1998 (unaudited) and December 31, 1997                            4

            Condensed Consolidated Statements of Operations
            (unaudited) for the six and three months
            ended June 30, 1998 and 1997                                      5

            Condensed Consolidated Statements of Cash Flows
            (unaudited) for the six months ended
            June 30, 1998 and 1997                                            6

            Notes to Condensed Consolidated Financial Statements              7

   ITEM 2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations                              11

PART II.    OTHER INFORMATION

   ITEM 1.  Legal Proceedings                                                15

   ITEM 4.  Submission of Matters to Vote of Security Holders                17

   ITEM 6.  Exhibits and Reports on Form 8-K                                 18

SIGNATURES                                                                   18


                                       3
<PAGE>

                          Part 1. Financial Information

ITEM 1.  Condensed Consolidated Financial Statements

                   Milestone Scientific Inc. and Subsidiaries
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
      ASSETS 
                                                          June 30        December 31
                                                            1998             1997
                                                        (unaudited)           *
                                                      --------------  -------------
<S>                                                    <C>             <C>      
CURRENT ASSETS
  Cash and cash equivalents                            $  3,031,354    $  9,775,019
  Investments - treasury bills                            5,932,200       5,778,369
  Accounts receivable                                     1,499,550         318,147
  Inventories                                             2,564,858       1,249,628
  Prepaid expenses                                          326,981          97,779
                                                       ------------    ------------

               Total current assets                      13,354,943      17,218,942

PROPERTY AND EQUIPMENT, NET                               4,456,006         762,882
PATENTS                                                   1,858,553       1,980,834
OTHER ASSETS                                                 32,474          33,406
                                                       ------------    ------------
                                                       $ 19,701,976    $ 19,996,064
                                                       ============    ============
        LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES    
  Line of credit - bank                                $    100,000    $    175,000
  Accounts payable                                        2,946,954       1,053,955
  Accrued expenses                                          459,690         247,433
                                                       ------------    ------------
               Total current liabilities                  3,506,644       1,476,388
                                                       ------------    ------------

STOCKHOLDERS' EQUITY
  Common stock, par value $.001; authorized,    
  25,000,000 shares; issued and outstanding,    
  8,817,882 and 8,661,866 shares, respectively                8,818           8,662
  Additional paid-in capital                             30,111,734      28,685,483
  Treasury stock                                           (911,516)             --
  Accumulated deficit                                   (13,013,704)    (10,174,469)
                                                       ------------    ------------

            Total stockholders' equity                   16,195,332      18,519,676
                                                       ------------    ------------
            Total  liabilities and stockholders'
              equity                                   $ 19,701,976    $ 19,996,064
                                                       ============    ============
</TABLE>

* Derived from audited financial statements at December 31, 1997

See notes to condensed consolidated financial statements


                                       4
<PAGE>

                   Milestone Scientific Inc. and Subsidiaries
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   For the six and three months ended June 30,
                                   (unaudited)

<TABLE>
<CAPTION>
                                   Six Months Ended             Three Months Ended
                                        June 30                        June 30
                                  1998           1997           1998             1997
                                  ----           ----           ----             ----
<S>                          <C>            <C>            <C>            <C>        
Revenues                     $ 7,114,302    $ 1,634,564    $ 1,854,153    $   871,841
Cost of sales                  4,992,626      1,006,401      2,310,735        535,228
                             -----------    -----------    -----------    -----------
Gross profit                   2,121,676        628,163       (456,582)       336,613
                             -----------    -----------    -----------    -----------
Selling, general and
   administrative expenses     4,996,661      2,253,506      2,737,170      1,324,788
Research and    
   development expenses          245,541        273,721        115,374        208,668
                             -----------    -----------    -----------    -----------

                               5,242,202      2,527,227      2,852,544      1,533,456
                             -----------    -----------    -----------    -----------

     Loss from operations     (3,120,526)    (1,899,064)    (3,309,126)    (1,196,843)
                             -----------    -----------    -----------    -----------

Other income and expense
  Interest income (net)          281,291         32,565        111,812         28,972
  Other income (net)                  --          2,600             --             --
                             -----------    -----------    -----------    -----------

                                 281,291         35,165        111,812         28,972
                             -----------    -----------    -----------    -----------

     NET LOSS                $(2,839,235)   $(1,863,899)   $(3,197,314)   $(1,167,871)
                             ===========    ===========    ===========    ===========

Loss per share - basic and
   diluted                   $     (0.32)   $     (0.36)   $     (0.36)   $     (0.21)
                             ===========    ===========    ===========    ===========

Weighted average shares
   outstanding                 8,755,501      5,202,074      8,777,385      5,563,630
                             ===========    ===========    ===========    ===========
</TABLE>

See notes to consolidated financial statements.


                                       5
<PAGE>

                   Milestone Scientific Inc. and Subsidiaries
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        For the six months ended June 30,
                                   (unaudited)

                                                         1998            1997
                                                         ----            ----
Cash flows from operating activities
  Net loss                                           $(2,839,235)   $(1,863,899)
  Adjustments to reconcile net loss to
  net cash used in operating activities
     Amortization and depreciation                       325,799        142,896
     Compensation expense                                221,452        130,040
     Changes in assets and liabilities
          Other assets                                       932         (1,919)
          Accounts receivable                         (1,181,403)      (235,939)
          Inventories                                 (1,315,230)       (52,202)
          Prepaid expenses                              (229,202)       (48,034)
          Accounts payable                             1,892,999        244,594
          Accrued expenses                               212,257         (9,032)
          Deferred revenue                                    --        (38,517)
                                                     -----------    -----------


   Net cash used in operating activities              (2,911,631)    (1,732,012)
                                                     -----------    -----------

Cash flows from investing activities
   Capital expenditures                               (3,896,642)      (162,332)
   Acquisition costs of minority interest in
     Spintech                                                 --         (5,392)
   Purchase of treasury bills                           (153,831)            --
                                                     -----------    -----------

  Net cash used in investing activities               (4,050,473)      (167,724)
                                                     -----------    -----------

Cash flows from financing activities
  Treasury stock purchase                               (911,516)            --
  Net proceeds from issuance of common stock           1,204,955      3,361,010
  Borrowing (repayments) under line of credit            (75,000)       175,000
                                                     -----------    -----------

  Net cash provided by financing activities          $   218,439    $ 3,536,010
                                                     -----------    -----------

NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS                                 $(6,743,665)   $ 1,636,274
Cash and cash equivalents at beginning of period       9,775,019        779,359
                                                     -----------    -----------
Cash and cash equivalents at end of period           $ 3,031,354    $ 2,415,633
                                                     ===========    ===========

Supplemental disclosures of cash flow information:
Cash paid during the period for interest             $     8,071    $    12,799
                                                     -----------    -----------

See notes to consolidated financial statements.


                                       6
<PAGE>

                   Milestone Scientific Inc. and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1998


NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

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

      These financial statements should be read in conjunction with the
      financial statements and notes thereto for the year ended December 31,
      1997 included in the Company's Annual Report on Form 10-KSB. The
      accounting policies used in preparing these financial statements are the
      same as those described in the December 31, 1997 financial statements.

      In the opinion of the Company, the accompanying unaudited financial
      statements contain all adjustments (consisting of normal recurring
      entries) necessary to present fairly the financial position as of June 30,
      1998 and the results of operations for the three month and six month
      periods ended June 30, 1998 and June 30, 1997 and cash flows for the
      six-month periods ended June 30, 1998 and 1997, respectively.

      The results reported for the three and six-month periods ended June 30,
      1998 are not necessarily indicative of the results of operations which may
      be expected for a full year.

NOTE 2 - REALIZATION OF ASSETS

      The accompanying financial statements have been prepared in conformity
      with generally accepted accounting principles, which contemplate
      continuation of the company as a going concern. However, the Company has
      sustained substantial losses from operations after the introduction of its
      Wand product, and has experienced significant returns of this product
      subsequent to its first fiscal quarter in 1998. In addition, the Company
      has used, rather than provided, cash in its operations during the
      six-month period ended June 30, 1998.

      In view of the matters described in the preceding paragraph,
      recoverability of a major portion of the recorded asset amounts shown in
      the accompanying balance sheet is dependent upon continued operations of
      the company, which in turn is dependent upon the success of the Company's
      Wand product. The financial statements do not include any adjustments
      relating to the recoverability and classification of recorded asset
      amounts or amounts and classification of liabilities that might be
      necessary should the Company be unable to continue in existence.

      Based on management's belief that the Wand, is a major advance in
      dentistry and may ultimately become the accepted method for delivering
      local dental anesthesia, the Company is taking steps that are aimed at
      growing and strengthening the end user base thereby gaining 


                                       7
<PAGE>

      greater acceptance of The Wand and translating to increased revenue
      through higher disposable handpiece usage. These steps include a) a survey
      of current Wand users to obtain feedback and provide further support, b) a
      revision of the standard agreement with dental schools to accelerate Wand
      acceptance, c) distribution of new Wand technique video and technical
      bulletins, d) direct to patient advertising with specialized sales effort
      in test markets and e) maintaining a well trained service staff.

      As of June 30, 1998, the Company had almost $9,000,000 in aggregate cash,
      cash equivalent and treasury bills. Management believes that through the
      proper utilization of these existing funds, the continued success of its
      receivable collection effort and the expense reductions achieved through
      cost containment programs, it will have sufficient cash to meet its need
      over the next twelve months.

      The Company will continue to pursue CE Mark (European Agency approval)
      certification for international marketing purposes, to investigate medical
      applications for the product and to develop product enhancements and
      improvements. Also, the raising of additional capital will continually be
      evaluated by management.

NOTE 3 - LOSS PER SHARE

      The Company has adopted Statement of Financial Accounting Standards
      ("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 requires the
      presentation of basic earnings per share and, for companies with complex
      capital structures or potentially dilutive securities, such as convertible
      debt, options, and warrants, diluted earnings per share.

      Basic loss per common share is computed using the weighted average number
      of common shares outstanding. Diluted loss per common share is computed
      using the weighted average common shares outstanding after giving effect
      to potential common stock from stock options based on the treasury stock
      method, plus any other potentially dilutive securities outstanding, unless
      the effect is anti-dilutive.

      For the three and six months ended June 30, 1998 and 1997, the assumed
      exercise of certain dilutive options and warrants were anti-dilutive.
      Accordingly, basic and diluted loss per share are based on the weighted
      average common shares outstanding.

      Options and warrants, in aggregate, to purchase 252,000 shares of common
      stock at prices ranging from $15.82 to $23.69 per share were issued during
      six months ended June 30, 1998 but were not included in the computation of
      diluted loss per share because effect would have been anti-dilutive.

      During the six months ended June 30, 1998 warrants to purchase 156,016
      shares of common stock were exercised at prices ranging from $4.72 to $9
      for which the company realized proceeds of $1,204,955.


                                       8
<PAGE>

NOTE 4 - LITIGATION

      Class Action

      Several class action lawsuits have been commenced against the Company,
      certain present and former executive officers, one outside director and
      one consultant in the United States District Court for the District of New
      Jersey. The District Judge before whom the cases are pending has stated
      that he will enter an order consolidating all of the class actions into
      one consolidated action. The Complaints contain generally overlapping and
      similar allegations of violations of the Securities Exchange Act of 1934,
      including allegations that the Company and certain of the other defendants
      violated the Act by issuing false and misleading financial statements and
      disseminating misleading statements about, among other things, the demand
      for the Company's principal product, its expected sales growth, the
      acceptance of that product by dental professionals, shipments during
      certain time periods and misrepresentations as the third-party evaluations
      of the efficacy of the product through failure to disclose the issuance of
      stock options to certain consultants.

      Milestone believes that material allegations of the Complaints lack merit
      and intends to vigorously defend the above actions. Specifically,
      Milestone believes that its financial statements fairly present its
      results of operations, that the information which it has publicly
      disclosed does not contain any material misstatements or
      misrepresentations and that stock options issued to persons who published
      research reports were issued for other services for the Company,
      principally service as spokespersons and demonstrators of the Company's
      product. Further, the Company continues to believe that The Wand(TM)
      embodies superior technology, is a major advance in dentistry and may
      ultimately become the accepted method for delivering local dental
      anesthesia.

      Spinello

      In May 1998, the Company received a favorable decision on motions filed by
      plaintiffs and defendant in the actions brought in the United States
      District Court of the District of New Jersey by Milestone Scientific, Inc.
      and its subsidiary, Spintech Inc. against Ronald P. Spinello. The United
      States Magistrate Judge issued a Report recommending that the Court grant
      Milestone's motions to dismiss the counterclaims brought by defendant
      Spinello for a shareholder's derivative action and civil conspiracy,
      finding that defendant Spinello had failed "to state a claim upon which
      relief may be granted." The Report also recommended that the Court dismiss
      defendant Spinello's counterclaim for indemnification against Milestone
      and a portion of the indemnification claim against Spintech. In a second
      decision, the Magistrate Judge denied defendant Spinello's motion to join
      Milestone's Chief Executive Officer as an additional party and to file an
      amended answer asserting revised and additional counterclaims against
      Milestone and Spintech. The Magistrate Judge determined that defendant
      Spinello's proposed amended counterclaims "are futile and could not
      withstand a motion to dismiss under federal rule of civil procedure
      12(b)(6)". Defendant Spinello has filed an appeal with the United States
      District Court from the Magistrate Judge's decision denying this motion to
      amend and also has filed an objection to the Magistrate Judge's
      recommendation to dismiss portions of Spinello's counterclaim. The Company
      and Spintech 


                                       9
<PAGE>

      have filed responses to the appeal and objection. The appeal and objection
      have been fully briefed and submitted to the District Court, but no
      decision has been rendered.

      If the District Court upholds the Magistrate Judge's decisions, the only
      counterclaims remaining are compensatory damages for alleged breaches of
      an employment contract and a portion of the indemnity claim. As previously
      reported, Milestone believes it has meritorious defense to those remaining
      claims. Milestone's claims against defendant Spinello are for recovery of
      compensatory and punitive damages for extortion and tortious interference
      with contract and business relationships and for declaratory judgement
      remain before the Court.

NOTE 5 - TREASURY STOCK

      Pursuant to its stock purchase program covering the purchase of up to
      500,000 shares of Common Stock, the Company purchased 100,000 shares of
      its Common Stock during June 1998 at an aggregate price, including
      commission and fees of $911,515.

NOTE 6 - STOCK OPTION PLAN

      On June 30, 1998 at the annual meeting of stockholders, approval was given
      to an amendment to the Company's Stock Option Plan increasing the number
      of shares of Company's Common Stock which may be issued thereunder from
      500,000 to 1,000,000 shares.


                                       10
<PAGE>

ITEM 2.  Management's  Discussion  and  Analysis of  Financial  Condition  and
         Results of Operation

     Three Months Ended June 30, 1998 as compared to the Three Months Ended
                                 June 30, 1997.

Statement of Operations

Coinciding with the initial launch of the Wand during the first quarter and
through the next month and a half of the second quarter, the Company maintained
high levels of production and committed capital to increase production capacity.
The product's early success was then tempered by a combination of declining
sales through the remainder of the second quarter and increasing returns during
the period. Fueled by as well as fueling negative publicity and in combination
with the filing of class action lawsuits, these conditions have continued
through the normally slower summer months and have resulted in higher levels of
inventory and production capacity that far exceed current demand. Therefore, the
Company, as explained below, has provided reserves against sales sufficient to
cover possible product returns and has reduced the carrying value of its
inventory so as to reflect their value under the current market conditions and
in the wake of the introduction of new improved products.

Net sales for the three months ended June 30, 1998 and June 30, 1997 were
$1,854,153 and $871,841, respectively. The $982,312 or 113% increase is
attributable to approximately $1,400,000 in net sales for The Wand(TM), (a
computer controlled "painless" injection system) and including disposable
handpieces, offset by a decrease in net sales from the Company's Wisdom product
line of approximately $400,000.

Cost of sales for the three months ended June 30, 1998 and June 30, 1997 were
$2,310,735 and $535,228, respectively. The $1,775,507 increase is mainly
attributable to the cost of sales for The Wand(TM). It includes inventory
reserves and property and equipment adjustments totaling $1,099,000. The
inventory reserve of $1,029,000 relates to Wand units and disposable handpieces
deemed slow moving because of new improved products. Equipment has been adjusted
by $70,000 to cover equipment which will be replaced by either new product molds
or by the completion of the semi- automation process which is scheduled for late
August 1998.

For the three months ended June 30, 1998, the Company recorded a gross loss of
$456,582. The $793,195 decrease when compared to the $336,613 gross profit for
the three months ended June 30, 1997, is primarily attributable to the
aforementioned inventory reserve partially offset by The Wand(TM) sales.

In conjunction with the launch of The Wand(TM) during the first quarter of 1998,
the Company established a $528,000 reserve against sales. This reserve was
established to cover expected returns attributable to first quarter sales. In
the second quarter, actual returns attributable to second quarter sales were
recorded upon receipt. In addition, at June 30, 1998, the Company had a $928,000
reserve established to cover expected returns attributable to second quarter
sales.


                                       11
<PAGE>

Selling, general and administrative expenses for the three months ended June 30,
1998 and June 30, 1997 were $2,737,170 and $1,324,788 respectively. The
$1,412,382 increase is primarily attributable to approximately $1,200,000
aggregate increase in selling and marketing expenses associated with The
Wand(TM), an increase in legal and professional fees of $83,000, and a $73,000
increase in corporate salaries. This was partially offset by a $300,000 decrease
in expenses associated with the Wisdom product line.

Research and development costs for the three months ended June 30, 1998 and June
30, 1997 were $115,374 and $208,668, respectively.

Net interest income for the three months ended June 30, 1998 and June 30, 1997
were $111,812 and $28,972, respectively. The $82,840 increase was mainly
attributable to interest income investments from the net proceed of two private
placements in 1997 and a reduction in the Company's borrowing under a line of
credit.

The net loss of $3,197,314 for the quarter ended June 30, 1998 was primarily the
result of increased SG&A expenses and the inventory reserve partially offset by
sales of The Wand(TM). The loss represents a $2,029,433 increase when compared
to the net loss of $1,167,871 for the second quarter of 1997.

       Six Months Ended June 30, 1998 as compared to the Six Months Ended
                                 June 30, 1997.

Statement of Operations

Net sales for the six months ended June 30, 1998 and June 30, 1997 were
$7,114,302 and $1,634,564 respectively. The $5,479,738 or 335% increase is
mainly attributable to approximately $6,200,000 in net sales for The Wand(TM),
and including disposable handpieces, offset by a decrease in net sales from the
company's Wisdom product line of approximately $700,000.

Cost of sales for the six months ended June 30, 1998 and June 30, 1997 were
$4,992,626 and $1,006,401, respectively. The $3,986,225 or increase is mainly
attributable to the cost of sales for The Wand(TM). It includes inventory
reserves and property and equipment adjustments totaling $1,099,000. The
inventory reserve of $1,029,000 relates to wand units and disposable handpieces
deemed slow moving because of new improved products. Equipment has been adjusted
by $70,000 to cover equipment which will be replaced by either new product molds
or by the completion of the semi automation process which is scheduled for late
August 1998.

Gross profit for the six months ended June 30, 1998 and June 30, 1997 were
$2,121,676 and $628,163, respectively. The 1,493,513 or 238% increase is
primarily attributable to The Wand(TM) sales, partially offset by the
aforementioned inventory reserve.


                                       12
<PAGE>

In conjunction with the launch of The Wand(TM) during the first quarter of 1998,
the Company established a $528,000 reserve against sales. This reserve was
established to cover expected returns attributable to first quarter sales. In
the second quarter, actual returns attributable to second quarter sales were
recorded upon receipt. In addition, at June 30, 1998, the Company established a
$928,000 reserve to cover expected returns attributable to second quarter sales.

Selling, general and administrative expenses for the six months ended June 30,
1998 and June 30, 1997 were $4,996,661 and $2,253,506 respectively. The
$2,743,155 or 122% increase is primarily attributable to approximately
$2,500,000 aggregate increase in selling and marketing expenses associated with
The Wand(TM), an increase in legal and professional fees of approximately
$180,000, and a $156,000 increase in corporate salaries. This was partially
offset by a $500,000 decrease in expenses associated with the Wisdom product
line.

Research and development costs for the six months ended June 30, 1998 and June
30, 1997 were $245,541 and $273,721, respectively.

Net interest income for the six months ended June 30, 1998 and June 30, 1997
were $281,291 and $32,565, respectively. The $248,726 increase was mainly
attributable to investments income from the net proceed of two private
placements in 1997 and a reduction in the Company's borrowings under a line of
credit.

The net loss of $2,839,235 for the six months ended June 30, 1998 was primarily
the result of increased SG&A expenses and the inventory reserve partially offset
by sales of The Wand(TM). The loss represents a $975,336 increase as compared to
the net loss of $1,863,899 for the six months ended June 30, 1997.

Liquidity and Capital Resources

At June 30, 1998, the Company's working capital was $9,848,299. It consisted
primarily of cash generated from two private placements in 1997 and from
exercised warrants.

For the six months ended June 30, 1998, the Company decreased cash and cash
equivalents by $6,743,665 as it increased the non cash components of working
capital by $849,410, continued its semi-automation and other capital expenditure
programs totaling $3,896,642, and repurchased company stock for $911,516.

For the six months ended June 30, 1998 the Company's net cash used in operating
activities was $2,911,631. This was primarily attributable to a net loss of
$2,839,235 (adjusted for non cash items of $325,799 for amortization and
depreciation and $221,452 for compensation expense), a $1,181,403 increase in
accounts receivable, $1,315,230 increase in inventory and a $229,202 increase in
prepaid expenses. This was primarily offset by increases in accounts payable and
accrued expenses of $1,892,999 and $212,257, respectively.

Capital expenditures of $3,896,642 were the primary component of the $4,050,473
of cash used in investing activities for the six months ended June 30, 1998.

Financing activities provided $218,439 for the period. The Company received
$1,204,955 as $156,016 warrants were exercised. The Company used $911,516 to
repurchase 100,000 shares of its stock. The Company's Wisdom subsidiary reduced
its borrowing under its line of credit by $75,000.


                                       13
<PAGE>

As of June 30, 1998, the Company had approximately $9 million in aggregate cash,
cash equivalents and treasury bills. Management believes that through the proper
utilization of these existing funds, the continued success of its receivable
collection effort and the expense reductions achieved through cost containment
programs, the Company will have sufficient cash to meet its needs over the next
twelve months.

Also, the company is taking steps that are aimed at growing and strengthening
the end user base thereby gaining greater acceptance of The Wand and translating
to increased revenue through higher disposable handpiece usage. These steps
include a) a survey of current Wand users to obtain feedback and provide further
support, b) a revision of the standard agreement with dental schools to
accelerate Wand acceptance, c) distribution of new Wand technique videos and
technical bulletins, d) direct to patient advertising with specialized sales
effort in test markets and e) maintaining a well trained service staff.

The Company will continue to pursue CE Mark (European Agency approval)
certification for international marketing purposes, to investigate medical
application for the product and to develop product enhancements and
improvements. Also, the merits in the raising of additional capital as always
will continue to be evaluated.

The Company has continued to implement changes in its selling and marketing of
The Wand. During the second quarter, the company appointed additional dealers,
added part time commission sales people, initiated new product based promotions,
increased its presence in dental schools and forwarded technical bulletins to
its known end users. Subsequently, as mentioned above, the Company began a
campaign to gain a better understanding of its end user base, to obtain feedback
regarding The Wand, to better gauge disposable handpiece usage and to offer
additional support when necessary.

During July and August of 1998, the Company, through a polling agency, performed
and continues to perform a telephone survey of several thousand Wand owners.
Milestone received almost 6,000 dentist contacts from its distributor partners,
including Sullivan-Schein, Patterson Dental and the American Dental Cooperative
(ADC) Member Companies. To date, the results received from over 4,000 of these
dentists has provided invaluable information in the short six months in which
The Wand has been deployed in the market. Over 50% of those surveyed considered
themselves "happy" users. Twenty two percent felt that The Wand did not meet
their expectations but were satisfied enough to continue to utilize the unit and
the remainder for the most part had not yet had The Wand long enough to form an
opinion about the product. The Company offers assistance, when necessary, to all
of these users from the Company's service staff, a Milestone sales
representative or from another dentist.

The survey found that usage of The Wand does differ significantly from how
dentists would use a traditional syringe. On average, dentists administer a
single tooth injection (PDL) or a palatal injection 2% of the time for each with
traditional techniques. With The Wand, usage accelerates to 28% for the PDL and
32% for the palatal injection. In the case of those surveyed dentists who use
The Wand regularly, The Wand is used for 60% of their daily injections rounding
to an average of 6 times per day. Thirty five percent of those surveyed said
they have ordered additional disposable handpieces at least once since receiving
The Wand.


                                       14
<PAGE>

When asked what type of efforts the company should take to promote and support
usage of The Wand, the dentists surveyed had both marketing and clinical
suggestions including direct to patient advertising and the acceleration of the
adoption of The Wand into dental school curriculums. Additionally, dentists
would like an easier way to insert anesthetic cartridges and a shorter
aspiration time while giving an injection. The Company is working to bring this
time down to less than 10 seconds from its current 14 seconds.

The Company concluded that dentists need further education on The Wand's
patented FloSlow technology and its benefits for both the patient and the
dentist since it often decreases the time the patient spends in the chair. More
education is needed on the proper technique to achieve profound anesthesia and
how to test for it. Also, it is important that knowledgeable salespeople spend
time one-on-one with the dentist for Wand setup and startup. The Company is in
the process of implementing steps which address these areas.

PART II.    OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

Several class action lawsuits have been commenced against the Company, certain
present and former executive officers, one outside director and one consultant
in the United States District Court for the District of New Jersey. The District
Judge before whom the cases are pending has stated that he will enter an order
consolidating all of the class actions into one consolidated action. The
Complaints contain generally overlapping and similar allegations of violations
of the Securities Exchange Act of 1934, including allegations that the Company
and certain of the other defendants violated the Act by issuing false and
misleading financial statements and disseminating misleading statements about,
among other things, the demand for the Company's principal product, its expected
sales growth, the acceptance of that product by dental professionals, shipments
during certain time periods and misrepresentations as to the third-party
evaluations of the efficacy of the product through failure to disclose the
issuance of stock options to certain consultants.

Milestone believes that all material allegations of the Complaints lack merit
and intends to vigorously defend the above actions. Specifically, Milestone
believes that its financial statements fairly present its results of operations,
that the information which it has publicly disclosed does not contain any
material misstatements or misrepresentations and that stock options issued to
persons who published research reports were issued for other services for the
Company, principally service as spokespersons and demonstrators of the Company's
product. Further, the Company continues to believe that The Wand TM embodies
superior technology, is a major advance in dentistry and may ultimately become
the accepted method for delivering local dental anesthesia.


                                       15
<PAGE>

In May 1998, the Company received a favorable decision on motions filed by
plaintiffs and defendant in the actions brought in the United States District
Court of the District of New Jersey by Milestone Scientific, Inc. and its
subsidiary, Spintech Inc. against Ronald P. Spinello. The United States
Magistrate Judge issued a Report recommending that the Court grant Milestone's
motions to dismiss the counterclaims brought by defendant Spinello for a
shareholder's derivative action and civil conspiracy, finding that defendant
Spinello had failed "to state a claim upon which relief may be granted." The
Report also recommended that the Court dismiss defendant Spinello's counterclaim
for indemnification against Milestone and a portion of the indemnification claim
against Spintech. In a second decision, the Magistrate Judge denied defendant
Spinello's motion to join Milestone's Chief Executive Officer as an additional
party and to file an amended answer asserting revised and additional
counterclaims against Milestone and Spintech. The Magistrate Judge determined
that defendant Spinello's proposed amended counterclaims "are futile and could
not withstand a motion to dismiss under federal rule of civil procedure
12(b)(6)". Defendant Spinello has filed an appeal with the United States
District Court from the Magistrate Judge's decision denying this motion to amend
and also has filed an objection to the Magistrate Judge's recommendation to
dismiss portions of Spinello's counterclaim. The Company and Spintech have filed
responses to the appeal and objection. The appeal and objection have been fully
briefed and submitted to the District Court, but no decision has been rendered.

If the District Court upholds the Magistrate Judge's decisions, the only
counterclaims remaining are compensatory damages for alleged breaches of an
employment contract and a portion of the indemnity claim. As previously
reported, Milestone believes it has meritorious defense to those remaining
claims. Milestone's claims against defendant Spinello are for recovery of
compensatory and punitive damages for extortion and tortious interference with
contract and business relationships and for declaratory judgement remain before
the Court.


                                       16
<PAGE>

ITEM 4.     SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

The Company held its 1998 Annual Meeting of Stockholders on June 30, 1998. At
the meeting stockholders voted as follows:

Election of Directors

               Name
                                     For         Withheld
         Gregory, Paul               5,290,463     1,326,469
         Haimovitch, Larry           5,236,280     1,740,552
         Margolis, Louis I.          6,285,413       331,419
         Martin, Daniel R.           6,282,513       334,219
         McGeehan, Michael           5,197,170     1,419,662
         Montoncello, Giovanni       5,104.194     1.512,638
         Osser, Leonard              6,281,631       335,201
         Schiller, Leonard M.        6,144,480       472,351
         Sultanik, David             5,336,813     1,280,019
         Volok, Gregory              5,234,670     1,382,162
         Zelnick, Stephen A.         6,244,013       372,819

Amendment to the Stock Option Plan (increasing the shares issuable thereunder by
500,000 shares):

For 1,773,930   Against 1,752,169   Abstain 50,476   Broker Non Vote 3,034,257

Appointment of Grant Thornton LLP as auditors for 1998

For 6,406,621   Abstain 103,785     Broker Non Vote 100,426


                                       17
<PAGE>

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            (a) Exhibits:
                  None
            (b) Reports on Form 8-K:
                  A report on Form 8-K was filed on June 29, 1998 covering
                  "Item 5: Other Events"
                
                                   Signatures

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


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

                              /s/ Thomas M. Stuckey
                              ---------------------------
                              Thomas M. Stuckey, Vice President and
                              Chief Financial Officer
Dated: August 17, 1998


  
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