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, 1999
                               -------------

                                       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 11, 1999 the Registrant had a total of 8,717,882 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 (unaudited)         4

              Condensed Consolidated Balance Sheets at June 30,
              1999 and December 31, 1998                                      4

              Condensed Consolidated Statements of Operations
              for the six and three months ended June 30, 1999 and 1998       5

              Condensed Consolidated Statements of Cash Flows
              for the six months ended June 30, 1999 and 1998                 6

              Notes to Condensed Consolidated Financial Statements            7

     ITEM 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations                            13

PART II.      OTHER INFORMATION

     ITEM 4.  Submission of Matters to Vote of Security Holders              18

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

SIGNATURES                                                                   19


                                       3
<PAGE>

                          Part 1. Financial Information

ITEM 1. Condensed Consolidated Financial Statements

                   Milestone Scientific Inc. and Subsidiaries
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                        June 30       December 31
                                                          1999            1998
                                                      ------------    ------------
<S>                                                   <C>             <C>
             ASSETS

CURRENT ASSETS
   Cash and cash equivalents                          $    776,650    $    316,706
   Investments - treasury bills                          1,675,424       3,267,940
   Accounts receivable                                     284,977         430,907
   Inventories                                           1,635,652       1,255,262
   Prepaid expenses                                        295,554         127,263
                                                      ------------    ------------

         Total current assets                            4,668,257       5,398,078

PROPERTY AND EQUIPMENT, NET                              1,874,772       2,031,870
PATENTS, NET                                             1,614,002       1,736,275
OTHER ASSETS                                                10,317          29,997
                                                      ------------    ------------

                                                      $  8,167,348    $  9,196,220
                                                      ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Line of credit - bank                               $     50,000    $    150,000
  Accounts payable                                         433,848         544,705
  Accrued expenses                                         243,670         165,302
                                                      ------------    ------------
         Total current liabilities                         727,518         860,007
                                                      ------------    ------------

SENIOR CONVERTIBLE NOTES                                 2,250,000
                                                      ------------    ------------

STOCKHOLDERS' EQUITY
Common stock, par value $.001; authorized,
  25,000,000 shares; 8,817,822 issued as of June
  30,1999 and December 31, 1998                              8,818           8,818
Additional paid-in capital                              30,111,734      30,111,734
Accumulated deficit                                    (24,019,206)    (20,872,823)
Treasury stock, at cost, 100,000 shares                   (911,516)       (911,516)
                                                      ------------    ------------
         Total stockholders' equity                      5,189,830       8,336,213
                                                      ------------    ------------
         Total liabilities and stockholders' equity   $  8,167,348    $  9,196,220
                                                      ============    ============
</TABLE>

The accompanying notes are an integral part of these 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
                                          1999           1998           1999           1998
                                          ----           ----           ----           ----
<S>                                   <C>            <C>            <C>            <C>
Net Sales                             $ 1,534,154    $ 7,114,302    $   865,984    $ 1,854,153
Cost of sales                             816,771      4,992,626        317,457      2,310,735
                                      -----------    -----------    -----------    -----------

Gross profit (loss)                       717,383      2,121,676        548,527       (456,582)
                                      -----------    -----------    -----------    -----------

Selling, general and
    Administrative expenses             3,704,619      4,996,661      2,016,155      2,737,170
Research and development expenses         109,456        245,541         40,610        115,374
                                      -----------    -----------    -----------    -----------
                                        3,814,075      5,242,202      2,056,765      2,852,544
                                      -----------    -----------    -----------    -----------

          Loss from operations         (3,096,692)    (3,120,526)    (1,508,238)    (3,309,126)

Loss from termination of
   Wisdom product line                    (76,345)            --        (76,345)            --
Interest income, net                       26,654        281,291          7,022        111,812
                                      -----------    -----------    -----------    -----------

                Net loss              $(3,146,383)   $(2,839,235)   $(1,577,561)   $(3,197,314)
                                      ===========    ===========    ===========    ===========

Loss per share -- basic and diluted   $      (.36)   $      (.32)   $      (.18)   $      (.36)
                                      ===========    ===========    ===========    ===========

Weighted average shares outstanding     8,717,882      8,755,501      8,717,882      8,777,385
                                      ===========    ===========    ===========    ===========
</TABLE>

The accompanying notes are an integral part of these statements


                                       5
<PAGE>

                   Milestone Scientific Inc. and Subsidiaries

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        For the six months ended June 30,
                                   (unaudited)

<TABLE>
<CAPTION>
                                                               1999           1998
                                                               ----           ----
<S>                                                        <C>            <C>
Cash flows from operating activities
  Net loss                                                 $(3,146,383)   $(2,839,235)
  Adjustments to reconcile net loss
  to net cash used in operating activities
     Amortization                                              141,672        122,277
     Depreciation                                              227,276        203,522
     Compensation expense                                           --        221,452
     Changes in operating assets and liabilities
          Accounts receivable                                  145,930     (1,181,403)
          Inventories                                         (380,390)    (1,315,230)
          Prepaid expenses                                    (168,291)      (229,202)
          Other assets                                             281            932
          Accounts payable                                    (110,857)     1,892,999
          Accrued expenses                                      78,368        212,257
                                                           -----------    -----------

   Net cash used in operating activities                    (3,212,394)    (2,911,631)
                                                           -----------    -----------
Cash flows from investing activities
   Capital expenditures                                        (70,178)    (3,896,642)
   Sale and (purchase) of treasury bills, net                1,592,516       (153,831)
                                                           -----------    -----------

  Net cash provided by (used in) investing activities        1,522,338     (4,050,473)
                                                           -----------    -----------

Cash flows from financing activities
  Net proceeds from issuance of senior convertible notes     2,250,000             --
  Net proceeds from issuance of common stock                        --      1,204,955
  Repayment under line of credit                              (100,000)       (75,000)
  Treasury Stock Purchase                                           --       (911,516)
                                                           -----------    -----------

  Net cash provided by financing activities                  2,150,000        218,439
                                                           -----------    -----------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                         459,944     (6,743,665)

Cash and cash equivalents at beginning of period               316,706      9,775,019
                                                           -----------    -----------

Cash and cash equivalents at end of period                 $   776,650    $ 3,031,354
                                                           ===========    ===========

Supplemental disclosures of cash flow information:
  Cash paid during the period for interest                 $     6,458    $     8,071
                                                           ===========    ===========
</TABLE>

The accompanying notes are any integral part of these statements.


                                       6
<PAGE>

                   Milestone Scientific Inc. and Subsidiaries

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1999

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,
      1998 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, 1998 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,
      1999 and the results of operations for the three month and six month
      periods ended June 30, 1999 and June 30, 1998 and cash flows for the six
      month periods ended June 30, 1999 and 1998, respectively.

      The results reported for the three and six month periods ended June 30,
      1999 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(TM) product, and had 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, 1999.

      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(TM) 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(TM), 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 greater
      acceptance of The Wand(TM) and translating to increased revenue through
      higher disposable handpiece usage. These steps include a) expanding the
      market overseas,


                                       7
<PAGE>

      b) obtaining feedback and providing further support to current Wand users,
      c) increasing the number of dental schools which include The Wand(TM) in
      their curriculum, d) distributing The Wand(TM) technique videos and
      technical bulletins to its current users, e) conducting direct to patient
      advertising with specialized sales effort in test markets and f)
      maintaining a well trained service staff.

      As of June 30, 1999, the Company had approximately $2.5 million in
      aggregate cash, cash equivalents and treasury bills. Management believes
      that through the proper utilization of these existing funds, revenues
      generated through international distributors and the expense reductions
      achieved through cost containment programs, it will have sufficient cash
      to meet its needs over the next twelve months.

NOTE 3 - LOSS 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, 1999 and 1998, the assumed
      exercise of certain dilutive options and warrants were anti-dilutive.
      Accordingly, basic and diluted loss per share is based on the weighted
      average common shares outstanding.

      Options and warrants, in aggregate, to purchase 83,000 shares of common
      stock at $3 per share and to purchase 5,000 at $2.00 per share, were
      issued in aggregate to one officer and certain key personnel during the
      six months ended June 30, 1999 but were not included in the computation of
      diluted loss per share because effect would have been anti-dilutive.

      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
      the six months ended June 30, 1998 but were not included in the
      computation of diluted earnings per share because their exercise price was
      greater than the average market price of the common shares.

      During the six months ended June 30, 1998 options and 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.

NOTE 4 - LITIGATION

      Spinello Lawsuits

      On March 26, 1997, Milestone and Spintech commenced legal action in the
      United States District Court of New Jersey against Ronald Spinello, DDS,
      former Chairman and Director of Research of Spintech. In the complaint,
      plaintiffs seek recovery of compensatory and punitive damages for
      extortion and tortuous interference with existing and prospective contract
      and business relationships, a declaratory judgment that Dr. Spinello has
      no personal rights to


                                       8
<PAGE>

      certain technology developed while he was employed as Director of Research
      of Spintech relating to the design and production of ancillary components
      of its computer controlled local anesthetic delivery system, a declaratory
      judgment that plaintiffs have not breached Dr. Spinello's employment
      agreement or the agreement for the initial purchase by Milestone of a 65%
      equity interest in Spintech and injunctive relief. On May 21, 1997, Dr.
      Spinello filed an answer and counterclaim which denies the material
      allegations of the complaint and seeks recovery for breach of the
      defendant's employment agreement, initiates a derivative action against
      Milestone with respect to various expenditures and actions for which
      Defendant, on behalf of Spintech, seeks an amount in excess of $75,000,
      alleges civil conspiracy against Milestone with respect to certain of
      those matters and the entry into the employment agreement with Defendant
      and seeks indemnification for expenses, including attorneys fees, in the
      pending action. On May 25, 1997, the Company filed a reply to
      counterclaims which denied all of the material allegations of the
      counterclaims. On December 30, 1997, Dr. Spinello made a motion for leave
      to join as an additional Defendant on Counterclaim the Company's Chairman,
      Leonard Osser, and to file an amended Answer and Counterclaim against the
      Company. Both the Company and Mr. Osser opposed the motion and in
      addition, the Company made a Cross-Motion to dismiss certain claims
      asserted in the initial Answer and Counterclaim. The additional claims
      which Dr. Spinello sought to assert against the Company include a fraud in
      the inducement claim based upon the alleged failure of the Plaintiffs to
      advise Dr. Spinello of the legal effects of his employment agreement; and
      a civil conspiracy claim. Dr. Spinello also sought to add a jury demand
      through his amended pleading. The Company's Cross-Motion sought to dismiss
      all of Dr. Spinello's claims, except his claim for unpaid salary, on the
      basis that his derivative claim is fatally defective because he did not
      make any demand upon Spintech, the entity on whose behalf he purports to
      bring suit, and his indemnification claim is fatally defective because the
      claims against him do not arise by reason of the fact that Dr. Spinello
      was an officer or director of Spintech.

      On May 5, 1998, 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 Chairman 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 timely filed an appeal from
      the May 5, 1998 Order and objections to the Report. On August 24, 1998, a
      United States District Judge for the District of New Jersey issued a
      memorandum opinion and signed an Order denying Dr. Spinello's appeal of
      the May 5, 1998 Order and affirming the May 5, 1998 Order in its entirety.
      The Judge further denied in its entirety Dr. Spinello's objections to the
      Report and granted the Company's motion to dismiss counts one, two, three
      and four of Dr. Spinello's initial Counterclaim.

      As a result of the affirmance of the May 1998 Order and the adoption of
      the Report granting the Company's motion to dismiss, the only claims
      remaining in the litigation with Dr. Spinello are Milestone's claims
      against Dr. Spinello and Dr. Spinello's counterclaim for unpaid salary


                                       9
<PAGE>

      for the period subsequent to his alleged wrongful termination, and a
      portion of his indemnification claim against Spintech.

      In October 1998, the Company received a settlement demand from Counsel for
      Dr. Spinello and Glenn Spinello which stated that, notwithstanding the
      United States District Judge's decision, substantial claims remain to be
      litigated and that there are substantial risks to Milestone from this
      litigation. The settlement demand letter, which was not accepted by the
      Company, does not describe the nature of any claims that Dr. Spinello
      could assert against the Company, but it does allude to potential
      litigation in other forums and the possibility of future litigation
      brought by minority stockholders of the Company. If Dr. Spinello does seek
      to assert additional claims, or if minority stockholders should assert
      claims, against the Company, the Company intends to vigorously defend such
      claims and believes that it has meritorious defenses thereto.

      On March 5, 1999, the parties completed discovery. On April 15, 1999, the
      parties made various dispositive motions for summary judgment on almost
      all of the issues remaining in the case. The motions were submitted to the
      Court on June 14, 1999. If the motions for summary judgment are not
      granted, the Court will hold a trial on any remaining issues in late 1999.
      The Company believes that it has meritorious defenses to Dr. Spinello's
      claims and meritorious claims against Dr. Spinello. Moreover, Milestone
      has been advised by its patent counsel that all technology developed by
      Dr. Spinello while employed by Spintech is owned by Spintech. The Company
      believes that ownership of the technology relating to these ancillary
      components which are the subject of this litigation in no way prevents the
      manufacture and sale of its anesthetic delivery system at economically
      viable prices.

      On May 20, 1997, Glenn R. Spinello filed a Complaint in the Court of
      Common Pleas, York County, Pennsylvania seeking damages as a result of the
      alleged breach of his Employment Agreement. On June 20, 1997, the Company
      and Spintech filed a notice of Removal which transferred venue of Glenn
      Spinello's lawsuit to the United States District Court for the Middle
      District of Pennsylvania. On June 27, 1997, the Company and Spintech filed
      an Answer to Glenn Spinello's Complaint which denied the material
      allegations of the Complaint and asserted counterclaims based upon Glenn
      Spinello's breach of his Employment Agreement. On July 27, 1997, Glenn
      Spinello filed a reply to the counterclaims by the Company and Spintech,
      denying the material allegations of the counterclaims. On March 16, 1999,
      the parties completed discovery. On April 16, 1999, Glenn Spinello made a
      motion for summary judgment on his claims against the Company, and on May
      3, 1999 the Company filed its opposition thereto. The motion has been
      submitted to the Court for decision. If the motion is denied, the case
      should be scheduled for trial in late 1999. The Company believes it has
      meritorious defenses to Glenn Spinello's claims and meritorious
      counterclaims against Glenn Spinello.

      Class Action Lawsuit

      In 1998, several class action lawsuits were commenced against the Company,
      certain present and former executive officers, one outside director and
      consultants in the United States District Court for the District of New
      Jersey. The District Judge before whom the cases are pending has entered
      an order consolidating all of the class actions into one consolidated
      action. The Complaints contain generally overlapping and similar
      allegations of violations of


                                       10
<PAGE>

      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 third-party evaluations of the efficacy of the
      product through failure to disclose the issuance of stock options to
      certain consultants. On October 22, 1998, the District Judge entered an
      order appointing lead plaintiff to represent the interests of all class
      members. On March 28, 1999, the District Judge appointed lead counsel to
      represent the class. On April 28, 1999, the class filed a Consolidated and
      Amended Class Action Complaint, naming as defendants the Company and three
      present and former executive officer and director. The Consolidated
      Complaint alleges that the Company issued false and misleading statements
      concerning, among other things, certain studies and reports on the
      Company's products, the Company's backlog and the amount of reserve taken
      for returns. Milestone believes that the material allegations of the
      Consolidated Complaint does not state a cause of action under the Federal
      Securities Law and on May 21, 1999 served a motion to dismiss the
      Consolidated Complaint for failure to state a claim. The class has
      responded to the motion and the Company intends to file a reply. The
      Motion is scheduled to be submitted to the Court in September 1999. To the
      extent that the Court does not dismiss the Consolidated Complaint at this
      early stage, Milestone intends to vigorously defend against the Class
      Action. Specifically, Milestone believes that its financial statements
      presented fairly its results of operations, that the information which it
      has publicly disclosed did 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.

      Derivative Action Lawsuit

      In February 1999, a purported owner of Milestone stock, had commenced a
      derivative action on behalf of the Company, in the Court of Chancery of
      the State of Delaware in Newcastle County, against certain present and
      former executive officers and directors. In the action, plaintiff alleges
      that, based on the same facts as the class actions described above, the
      defendants engaged in violations of the securities laws, committed fraud
      and securities fraud, wasted corporate assets and damaged the Company's
      reputation. As a derivative action, even if the plaintiff is successful,
      any award, after deduction of plaintiff's costs and disbursements, would
      be payable to the Company. Nevertheless, Milestone believes that the
      material allegations of the complaint lack merit and intends to provide a
      legal defense for its present and former officers and directors in
      accordance with the indemnification provisions of its Certificate of
      Incorporation. Because the allegations of the Derivative Complaint are so
      closely tied to the allegations of the Class Complaint, the Derivative
      Plaintiff's counsel has agreed with the Company that no response to the
      Derivative Complaint is due until 60 days after the Court in the Class
      Action decides the motion to dismiss.

      Insurance Broker and Carrier

      In January 1999, the Company filed a complaint against its insurance
      broker (Frank Crystal Financial Services) and the two excess insurers
      [American Alliance and St. Paul] in the United


                                       11
<PAGE>

      States District Court for the District of New Jersey. American Alliance
      and St. Paul were in dispute with the Company because they claim that the
      Company did not timely submit the appropriate application. As a result,
      American Alliance refused to issue a policy and St. Paul, which issued a
      policy, has refused to cover the class actions described above. In April
      1999, the Company reached a settlement of this action, as a result of
      which American Alliance issued the Excess Director's and Officer's
      Insurance Policy; the Company agreed that claims arising prior to the date
      of the policy were not covered by the policy and the parties reserved all
      of their arguments and positions with respect to any other coverage issues
      including those that resulted from the Consolidated and Amended Class
      Action Complaint referred to above.

      On June 24, 1999 American Alliance filed a complaint in the United States
      District Court for the Southern District of New York seeking a declaratory
      judgment that it is not liable under its policy for the claim asserted in
      the amended class complaint as the derivative complaint. The Company
      intends to vigorously defend against the American Alliance action and
      intends to move to dismiss that action. In addition, on July 9, 1999 the
      Company filed its own declaratory judgment action against American
      Alliance and St. Paul in the United States District Court for the District
      of New Jersey seeking a declaration that the claims asserted in the
      Consolidated Complaint in the Class Action and in the Derivative Action
      are covered by the Excess Director's and Officer's Insurance Policies.
      That action is in its early stages and no response to the Complaint has
      yet been filed.

NOTE 5 - EMPLOYEE BENEFIT PLANS

      In January 1999, the Company offered to all full-time employees, a Board
      approved 401K plan. The plan allows eligible employees to contribute into
      specified investments vehicle 2% to 15% of their before tax salaries, (up
      to the IRS limit). Although the plan does not contain any mandatory
      matching provision, it allows the Company to contribute a discretionary
      contribution on a matching and/or profit sharing basis. The Company's
      contributions, if any, vest in increments of 20%, beginning upon the
      completion of 2 years of service. An employee will become fully vested
      after completing 6 years of service.

NOTE 6 - PRIVATE PLACEMENT

      In March 1999, the Company concluded a $2 million institutional private
      placement with Cumberland Partners, other investment funds managed by or
      affiliated with Cumberland Associates and certain principals of Cumberland
      Associates. An additional $250,000 was raised from the Chairman and Chief
      Executive Officer of Milestone, on the same terms and conditions. The
      investors purchased, at face value, 3% Senior Convertible Notes Due 2003,
      convertible into Milestone Common Stock at prices increasing from $2.50
      per share in the first year to $6.00 per share in the fourth year, subject
      to antidilution protection in the event of stock dividends and certain
      capital changes. Purchasers of the Notes were granted rights to
      participate in certain future security offerings by Milestone.

NOTE 7 - WISDOM PRODUCT LINE

      In April 1999, the Company discontinued its selling effort with regards to
      the Wisdom product line excluding SplatrFree(TM) prophy angles. The
      discontinued products generated net sales of $174,086 and an operating
      loss of $52,911 for the six months ended June 30, 1999. For the six months
      ended June 30, 1998, these products generated $911,834 in net sales and
      operating income of $89,195. In terminating the product line the Company
      incurred $76,345


                                       12
<PAGE>

      of expenses, including $19,291 for uncollectible receivables, $15,692 in
      aggregate termination compensation and employee benefits, $5,066 for a
      lease buyout, $18,793 in previously unamortized acquisition costs and
      $17,503 to write off inventory.

      The Company had a line of credit which had originally been secured by the
      assets associated with the Wisdom product line. In June 1999, the Company
      obtained a thirty day extension of its $250,000 line of credit with some
      temporary modifications including a line reduction. On July 26, 1999, the
      Company notified its lender that the Company would no longer be utilizing
      the line and remitted the outstanding balance of $50,000.

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

      The Company launched The Wand(TM) (a computer controlled system that
      enables virtually "painless" injections) during the first quarter of 1998.
      The product's early success was then tempered by significant returns and
      declining sales during the last seven and a half months of 1998. Based on
      further research and development and user feedback, several product
      improvements were made. This has resulted in a significant decline in
      returns. Furthermore, in January 1999, the Company received approval to
      apply the CE mark to "The Wand" for European distribution. The Company
      began shipping "The Wand" to its international partners during the last
      week of March 1999.

      Three months ended June 30, 1999 compared to three months ended June 30,
      1998

Statement of Operations

      Net sales for the three months ended June 30, 1999 and June 30, 1998 were
      $865,984 and $1,854,153 respectively. The $988,169 or 53% decrease
      reflects a sharp decline in Wand sales volume (including disposable
      handpieces) partially offset by a decrease in returns and a lower return
      reserve. The Wisdom product line had generated approximately $510,000 in
      net sales for the three months ended June 30, 1998. For the quarter ended
      June 30, 1999, approximately $583,000 in revenue was generated through
      sales to international distributors. Also, domestic handpieces sales
      increased 15% as compared to the first quarter of 1999, generating
      $198,000 in revenue.

      Cost of sales for the three months ended June 30, 1999 as compared to the
      three months ended June 30, 1998 declined from $2,310,735 to $317,457, a
      $1,993,278 reduction. The reduction is primarily attributable to lower
      sales volume and to lower returns for the Wand (including disposable
      handpieces). It also reflects a decrease in average product costs due to
      prior period inventory writedowns. Also, costs of sales attributable to
      the Wisdom product line were approximately $305,000 for the three months
      ended June 30, 1998.

      For the three month June 30, 1999, the Company generated a gross profit of
      $548,527 as compared to a gross loss of $456,582 for the three month June
      30, 1998.

      Selling, general and administrative expenses for the three month ended
      June 30, 1999 and June 30, 1998 were $2,016,155 and $2,737,170
      respectively. The $721,015 or 26% decrease is primarily attributable to
      approximately $538,000 aggregate decrease in selling and marketing
      expenses associated with The Wand(TM), a $129,000 reduction in corporate
      salaries,


                                       13
<PAGE>

      a $126,647 decrease in compensation expense related to 1998 option grants,
      and a $228,000 reduction in selling and marketing expenses associated with
      the Wisdom product line. These expenses were offset by $167,000 increase
      in legal expenses.

      Research and development expenses for the three months ended June 30, 1999
      and June 30, 1998 were $40,610 and $115,374, respectively. The $74,764
      decrease is primarily attributable to the cost incurred in developing "The
      Wand(TM)" during 1998.

      Loss from operations for the three months ended June 30, 1999 and 1998
      were $1,508,238 and $3,309,126, respectively.

      In April 1999, the Company discontinued its selling effort with regards to
      the Wisdom product line excluding Splatrfree(TM) prophy angles. $76,345 in
      aggregate costs were incurred in terminating the product line. They
      included $19,291 for uncollectible receivables, $15,692 in aggregate
      termination compensation and employee benefits, $5,066 for a lease buyout,
      $18,793 in previously unamortized acquisition costs, and $17,503 to write
      off inventory currently earmarked for distribution to charities and trade
      associations.

      Net interest income for the three months ended June 30, 1999 and June 30,
      1998 was $7,022 and $111,812 respectively. The $104,790 decrease is
      primarily attributable to lower aggregate investing and the additional
      interest expenses associated with the senior convertible notes.

      The net loss for the three months ended June 30, 1999 was $1,577,561 and
      as compared to net loss of $3,197,314 for the three months ended June 30,
      1999. The decrease reflects sharp declines in product returns and in
      selling general and administrative expenses, and a decrease in the average
      product cost.

      Six months ended June 30, 1999 compared to six months ended June 30, 1998

Statement of Operations

      Net sales for the six months ended June 30, 1999 and June 30, 1998 were
      $1,534,154 and $7,114,302 respectively. The $5,580,148 or 78% decrease
      reflects a sharp decline in Wand sales volume (including disposable
      handpieces) partially offset by a decrease in returns and a lower return
      reserve. Furthermore, net sales from the Wisdom product line which was
      terminated in April, 1999 were $174,086 for the six months ended June 30,
      1999 as compared to $911,834 for the six months ended June 30, 1998.
      Approximately, $686,000 in revenue was generated through sales to
      international distributors for the six months ended June 30, 1999.

      Cost of sales for the six months ended June 30, 1999 as compared to the
      six months ended June 30, 1998 declined from $4,992,626 to $816,771, a
      $4,175,855 reduction. The reduction is primarily attributable to lower
      sales volume, a sharp decline in returns and a decrease in average product
      costs due to prior period inventory writedowns.

      For the six month June 30, 1999, the Company generated a gross profit of
      $717,383 as compared to a gross profit of $2,121,676 for the six month
      June 30, 1998.


                                       14
<PAGE>

      Selling, general and administrative expenses for the six month ended June
      30, 1999 and June 30, 1998 were $3,704,619 and $4,996,661 respectively.
      The $1,292,042 or 25% decrease is primarily attributable to approximately
      $785,000 aggregate decrease in selling and marketing expenses associated
      with The Wand(TM), a $183,000 reduction in corporate salaries, a $221,452
      decrease in compensation expense related to 1998 option grants, and a
      $228,000 reduction in selling and marketing expenses associated with the
      Wisdom product line. These expenses were offset by $274,000 increase in
      legal expenses.

      Research and development expenses for the six months ended June 30, 1999
      and June 30, 1998 were $109,456 and $245,541, respectively. The $136,085
      decrease is primarily attributable to the cost incurred in developing "The
      Wand(TM)" during 1998.

      Loss from operations for the six months ended June 30, 1999 and 1998 were
      $3,096,692 and $3,120,526, respectively.

      In April 1999, the Company discontinued its selling effort with regards to
      the Wisdom product line excluding Splatrfree(TM) prophy angles. $76,345 in
      aggregate costs were incurred in terminating the product line. They
      included $19,291 for uncollectible receivables, $15,692 in aggregate
      termination compensation and employee benefits, $5,066 for a lease buyout,
      $18,793 in previously unamortized acquisition costs and $17,503 to write
      off inventory currently earmarked for distribution to charities and trade
      associations.

      Net interest income for the six months ended June 30, 1999 and June 30,
      1998 was $26,654 and $281,291 respectively. The $254,637 decrease is
      primarily attributable to lower aggregate investing and the additional
      interest expenses associated with the senior convertible notes.

      The net loss for the six months ended June 30, 1999 was $3,146,383 and as
      compared to net loss of $2,839,235 for the six months ended June 30, 1998.
      The increase reflects a sharp decline in Wand(TM) sales volume partially
      offset a decrease in returns and lower selling and administrative expense.

      Liquidity and Capital Resources

      At June 30, 1999, the Company's working capital was $3,940,739. It
      consisted primarily of inventories, investment in treasury bills and cash
      and cash equivalent.

      For the six months ended June 30, 1999, the Company increased cash and
      cash equivalents by $459,944, providing $1,522,338 from investing
      activities and $2,150,000 from financing activities.

      For the six months ended June 30, 1999, the Company's net cash used in
      operating activities was $3,212,394. This was primarily attributable to a
      net loss of $3,146,383 adjusted for non cash items of $141,672 for
      amortization and $227,276 for depreciation, a $145,930 decrease in
      accounts receivable, a $380,390 increase in inventory, a $168,291 increase
      in prepaid expenses, a increase in accrued expenses of $78,368 and a
      $110,857 decrease in accounts payable.


                                       15
<PAGE>

      The $1,522,338 provided by investing activities for the six month ended
      June 30, 1999 was attributable to the maturing of $1,592,516 in treasury
      bills, offset by $70,178 in capital expenditures. These expenditures
      covered retooling cost for product modifications.

      Financing activities provided $2,150,000 for the period. The Company, as
      described below, raised $2,000,000 from an institutional private placement
      and $250,000 from the sale of similar securities to its Chairman and CEO.
      Also, $100,000 was repaid under the Company's line of credit.

      As of June 30, 1999, the Company had approximately $2.5 million in
      aggregate cash, cash equivalents and treasury bills. Management believes
      that through the proper utilization of these existing funds, revenue
      generated through international distributors, and the expense reductions
      achieved through cost containment programs, the Company will have
      sufficient cash to meet its needs for the next twelve months.

      Also, the Company has taken steps that are aimed at growing and
      strengthening the end user base thereby gaining greater acceptance of The
      Wand(TM) and translating to increased revenue through higher disposable
      handpiece usage. These steps include a) expanding its market overseas, b)
      obtaining feedback and providing further support to current Wand users, c)
      increasing the number of dental schools which include The Wand(TM) in
      their curriculum, d) distributing Wand(TM) technique videos and technical
      bulletins to its current users, e) conducting direct to patient
      advertising with specialized sales effort in test markets and f)
      maintaining a well trained service staff.

      To date, the Company has achieved two major objectives in its
      international marketing effort. In January 1999, "The Wand(TM)" was
      approved under the Medical Device Directive 93/42/EEC, a requirement for
      all dental and medical devices distributed throughout the European Union.
      This authorizes the Company to apply the CE mark to the product. In
      February 1999, the Company entered into an agreement for the international
      distribution of "The Wand(TM)" by the Dent-X dental division of AFP
      Imaging Corporation ("AFP"), through the international distribution
      network previously established by AFP for its dental and medical products.
      Milestone began shipments to AFP during the last week of March 1999.

      The Company intends to submit a new application to the FDA for a
      technologically similar device to The Wand(TM), specifically designed to
      address the need to deliver widely varying volumes of anesthetic and other
      medicaments for various medical disciplines. A working prototype device
      for delivery of multi-volume anesthetic and other medicaments has been
      developed. Also, the Company will continue to develop product enhancements
      and improvements. The raising of additional capital to fund these efforts
      will continually be evaluated by management.

      Private Placement

      In March 1999, the Company received $2 million from an institutional
      private placement with Cumberland Partners, other investment funds managed
      by or affiliated with Cumberland Associates and certain principals of
      Cumberland Associates. An additional $250,000 was raised from Leonard
      Osser, Chairman and Chief Executive Officer of Milestone, under the


                                       16
<PAGE>

      same terms and conditions. The investors purchased, at face value, 3%
      Senior Convertible Notes Due 2003, convertible into Milestone Common Stock
      at prices increasing from $2.50 per share in the first year to $6.00 per
      share in the fourth year, subject to anti-dilution protection in the event
      of stock dividends and certain capital changes. The shares underlying the
      Notes have been registered by Milestone and the purchasers of the Notes
      have been granted rights to participate in certain future security
      offerings by Milestone.

      Line of Credit

      In June 1999, the Company obtained a thirty day extension of its $250,000
      line of credit with some temporary modifications. This line had originally
      been secured by the assets associated with the Wisdom product line. On
      July 26, 1999, the Company notified its lender that the Company would not
      longer be utilizing the line and remitted the outstanding balance of
      $50,000.

      Year 2000 Compliance

      The Company has developed a plan to insure its operating systems are
      compliant with the requirements to process transactions in the year 2000.
      This plan includes the upgrade of its internal information systems which
      the Company believes will not entail significant costs related to these
      upgrades. Also, the Company has reviewed its own equipment and determined
      that the equipment is either Year 2000 compliant or not affected by the
      Year 2000 issues.

      The Company is in the process of contacting its vendors, on whom it
      relies, to assure that their systems are or will be Year 2000 compliant.
      Responses are evaluated so as to ensure that critical vendors are Year
      2000 compliant. Also, the Company is developing contingency plans to
      address the most likely worst case scenarios from potential Year 2000
      disruptions.

      Although the Year 2000 compliance plan is nearly complete. The Company
      will continue to develop the plan as new information becomes available.


                                       17
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

The Company held its 1999 Annual Meeting of Stockholders on July 6, 1999. At the
meeting, stockholders reelected all existing board members.

      Appointment of Grant Thornton LLP as auditors for 1999

      For 5,709,642         Against 117,683       Broker Non Vote 10,420
          ---------                 -------                       ------

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits:
      NONE

(b)   Reports on Form 8-K:
      NONE


                                       18
<PAGE>

                                   Signatures

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

                                      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: August 11, 1999


                                       19