##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 Mark One
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended June 30, 2007
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from to
 Commission File Number 001-14053
 MILESTONE SCIENTIFIC INC.
  Delaware
    
    13-3545623State or other jurisdiction or organization)
    
    (I.R.S. Employer Identification No.)
 220
South Orange Avenue, Livingston, New Jersey 07039
 (973) 535-2717
 Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or
1 5(d) of the Exchange Act during the past 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 þ No o
 Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
 As of August 14, 2007, the Issuer had a total of 11,724,516 shares of Common Stock, $.001 par
value, outstanding.




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##### Table of Contents



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




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##### 



I N D E X
 PAGEPART I. FINANCIAL INFORMATIONITEM 1. Financial Statements (unaudited)Condensed Balance Sheets June 30, 2007 (Unaudited) and December 31, 2006
    
    
    4Condensed Statements of Operations Three and Six Months Ended June 30, 2007 and 2006 (Unaudited)
    
    
    5Condensed Statements of Changes in Stockholders Equity Six Months Ended June 30, 2007 (Unaudited)
    
    
    6Condensed Statements of Cash Flows Six Months Ended June 30, 2007 and 2006 (Unaudited)
    
    
    7Notes to Condensed Financial Statements
    
    
    8ITEM 2. Managements Discussion and Analysis or Plan of Operation
    
    
    13ITEM 3 Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONITEM 6. Exhibits
    
    
    19SIGNATURES
    
    
    20CERTIFICATIONS
    
    
    21EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  3




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June 30, 2007(Unaudited)
    
    
    December 31, 2006ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    192,527
    
    
    $
    1,160,116Accounts receivable, net of allowance for doubtful accounts of $79,612
in 2007 and $16,519 in 2006
    
    
    699,421
    
    
    
    346,619Royalty receivable
    
    
    35,834
    
    
    
    60,107Inventories
    
    
    1,566,027
    
    
    
    1,323,338Advances to contract manufacturer
    
    
    1,149,121
    
    
    
    1,077,871Prepaid expenses
    
    
    45,225
    
    
    
    97,073Total current assets
    
    
    3,688,155
    
    
    
    4,065,124Investment in distributor, at cost
    
    
    76,319
    
    
    
    76,319Equipment, net of accumulated depreciation of $416,119 in 2007 and
$402,914 in 2006
    
    
    432,765
    
    
    
    459,259Patents, net of accumulated amortization of $53,362 in 2007 and
$41,938 in 2006
    
    
    515,329
    
    
    
    526,753Other assets
    
    
    12,261
    
    
    
    14,153Total assets
    
    $
    4,724,829
    
    
    $
    5,141,608LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    1,858,081
    
    
    $
    1,196,107Accrued expenses
    
    
    233,948
    
    
    
    232,076Deferred compensation payable to officers
    
    
    75,000Total current liabilities
    
    
    2,167,029
    
    
    
    1,428,183Stockholders EquityCommon stock, par value $.001; authorized 50,000,000 shares;
11,757,849 shares issued, 337,036 shares to be issued, and
11,724,516 shares outstanding in 2007; 11,692,636 shares issued,
337,036 shares to be issued, and 11,659,303
shares outstanding in 2006
    
    
    12,096
    
    
    
    12,031Additional paid-in capital
    
    
    58,168,474
    
    
    
    57,720,129Accumulated deficit
    
    
    (54,711,254
    )
    
    
    (53,107,219
    )Treasury stock, at cost, 33,333 shares
    
    
    (911,516
    )
    
    
    (911,516
    )Total stockholders equity
    
    
    2,557,800
    
    
    
    3,713,425Total liabilities and stockholders equity
    
    $
    4,724,829
    
    
    $
    5,141,608
  4




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Three Months Ended
    
    
    Six Months EndedJune 30, 2007
    
    
    June 30, 2006
    
    
    June 30, 2007
    
    
    June 30, 2006Product sales, net
    
    $
    1,770,337
    
    
    $
    1,425,821
    
    
    $
    4,032,364
    
    
    $
    2,986,740Royalty income
    
    
    35,834
    
    
    
    49,473
    
    
    
    83,770
    
    
    
    186,310Total revenue
    
    
    1,806,171
    
    
    
    1,475,294
    
    
    
    4,116,134
    
    
    
    3,173,050Cost of products sold
    
    
    955,274
    
    
    
    688,124
    
    
    
    1,786,484
    
    
    
    1,439,286Royalty expense
    
    
    (7,338
    )
    
    
    5,637
    
    
    
    (1,586
    )
    
    
    22,057Total cost of revenue
    
    
    947,936
    
    
    
    693,761
    
    
    
    1,784,898
    
    
    
    1,461,343Gross profit
    
    
    858,235
    
    
    
    781,533
    
    
    
    2,331,236
    
    
    
    1,711,707Selling, general and administrative expenses
    
    
    1,809,554
    
    
    
    1,369,497
    
    
    
    3,646,442
    
    
    
    2,849,212Research and development expenses
    
    
    121,398
    
    
    
    390,741
    
    
    
    299,964
    
    
    
    554,183Total operating expenses
    
    
    1,930,952
    
    
    
    1,760,238
    
    
    
    3,946,406
    
    
    
    3,403,395Loss from operations
    
    
    (1,072,717
    )
    
    
    (978,705
    )
    
    
    (1,615,170
    )
    
    
    (1,691,688
    )Interest income
    
    
    3,799
    
    
    
    24,690
    
    
    
    11,135
    
    
    
    52,094Net loss
    
    $
    (1,068,918
    )
    
    $
    (954,015
    )
    
    $
    (1,604,035
    )
    
    $
    (1,639,594
    )Loss per share  basic and diluted
    
    $
    (0.09
    )
    
    $
    (0.08
    )
    
    $
    (0.13
    )
    
    $
    (0.14
    )Weighted average shares outstanding and to be issued -
basic and diluted
    
    
    12,043,103
    
    
    
    11,768,940
    
    
    
    12,020,790
    
    
    
    11,755,335
  5




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AdditionalCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    TreasuryShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Stock
    
    
    TotalBalance, January 1, 2007
    
    
    12,029,672
    
    
    $
    12,031
    
    
    $
    57,720,129
    
    
    $
    (53,107,219
    )
    
    $
    (911,516
    )
    
    $
    3,713,425Common stock
issued from
exercise of stock options
    
    
    46,667
    
    
    
    47
    
    
    
    54,554
    
    
    
    
    
    
    
    
    
    
    
    54,601Common stock and options issued for
consulting services
    
    
    
    
    
    
    
    
    
    
    251,702
    
    
    
    
    
    
    
    
    
    
    
    251,702Common stock and options issued for
payment of employee compensation
    
    
    18,546
    
    
    
    18
    
    
    
    142,089
    
    
    
    
    
    
    
    
    
    
    
    142,107Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,604,035
    )
    
    
    
    
    
    
    (1,604,035
    )Balance, June 30, 2007
    
    
    12,094,885
    
    
    $
    12,096
    
    
    $
    58,168,474
    
    
    $
    (54,711,254
    )
    
    $
    (911,516
    )
    
    $
    2,557,800
  6




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SIX MONTHS ENDED JUNE 30,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (1,604,035
    )
    
    $
    (1,639,594
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation expense
    
    
    50,262
    
    
    
    48,661Amortization of patents
    
    
    11,424
    
    
    
    11,424Common stock and options issued for compensation and consulting
    
    
    393,809
    
    
    
    133,013Bad debt expense (recovery)
    
    
    64,378
    
    
    
    (19,957
    )Loss on disposal of equipment
    
    
    
    
    
    
    1,918Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (417,180
    )
    
    
    (137,372
    )Decrease in royalty receivable
    
    
    24,273
    
    
    
    136,229Decrease (increase) in inventories
    
    
    (242,689
    )
    
    
    85,583Increase in advances to contract manufacturer
    
    
    (71,250
    )
    
    
    (96,448
    )Decrease in prepaid expenses
    
    
    51,848
    
    
    
    23,774Decrease in other assets
    
    
    1,892
    
    
    
    5,028Increase in accounts payable
    
    
    661,974
    
    
    
    523,510Increase (decrease) in accrued expenses
    
    
    1,872
    
    
    
    (45,501
    )Increase in deferred compensation
    
    
    75,000
    
    
    
    108,332Net cash used in operating activities
    
    
    (998,422
    )
    
    
    (861,400
    )Cash flows from investing activities:Purchase of equipment
    
    
    (23,768
    )
    
    
    (10,716
    )Payment for patent rights
    
    
    
    
    
    
    (21,544
    )Net cash used in investing activities
    
    
    (23,768
    )
    
    
    (32,260
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    54,601
    
    
    
    Net cash provided by financing activities
    
    
    54,601
    
    
    
    NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (967,589
    )
    
    
    (893,660
    )Cash and cash equivalents at beginning of period
    
    
    1,160,116
    
    
    
    2,892,679Cash and cash equivalents at end of period
    
    $
    192,527
    
    
    $
    1,999,019
  7




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MILESTONE SCIENTIFIC INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
         8




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MILESTONE SCIENTIFIC INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
 (Unaudited)
   Ionic White
           Share-Based Payment
 9




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MILESTONE SCIENTIFIC INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
     WeightedWeighted
    
    
    AverageNumber
    
    
    Average
    
    
    Remaining
    
    
    Aggregateof
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    Options
    
    
    Price
    
    
    Life (Years)
    
    
    ValueOutstanding, January 1, 2007
    
    
    427,834
    
    
    $
    1.85
    
    
    
    3.34
    
    
    
    Granted
    
    
    80,000
    
    
    
    1.68
    
    
    
    
    
    
    
    Exercised
    
    
    (46,667
    )
    
    
    1.17
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (18,500
    )
    
    
    3.40
    
    
    
    
    
    
    
    Outstanding, June 30, 2007
    
    
    442,667
    
    
    $
    1.83
    
    
    
    3.36
    
    
    $
    306,551Exercisable, June 30, 2007
    
    
    329,000
    
    
    $
    1.96
    
    
    
    3.16
    
    
    $
    221,434
   10




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MILESTONE SCIENTIFIC INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
    WeightedWeighted
    
    
    Averageaverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    price of options
    
    
    Life (Years)
    
    
    ValueOutstanding, January 1, 2007
    
    
    522,466
    
    
    $
    3.51
    
    
    
    3.17
    
    
    
    Granted
    
    
    125,000
    
    
    
    1.75
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (8,333
    )
    
    
    4.92
    
    
    
    
    
    
    
    Outstanding, June 30, 2007
    
    
    639,133
    
    
    $
    3.15
    
    
    
    3.06
    
    
    $
    81,999Exercisable, June 30, 2007
    
    
    461,355
    
    
    $
    3.47
    
    
    
    2.58
    
    
    $
    10,611
   U
  11




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MILESTONE SCIENTIFIC INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
         12




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis or Plan of Operation.
 OVERVIEW
  CompuFlo Single Tooth Anesthesia (STA) CompuFlo
 STA CompuDent
 STA STA STA . CompuDent
 STA STA
 STA STA
 STA
 13




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CompuDent CompuDent CompuDent
 STA CompuDent CompuDent CompuDent
 STA STA STA
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006DOMESTIC
    
    
    
    
    %
    
    
    
    
    
    %
    
    
    
    
    
    %
    
    
    
    
    
    %CompuDent
    
    $
    51,070
    
    
    
    3.5
    
    
    $
    230,068
    
    
    
    22.7
    
    
    $
    338,296
    
    
    
    10.2
    
    
    $
    451,862
    
    
    
    22.0STA Units
    
    
    555,043
    
    
    
    38.4
    
    
    
    
    
    
    
    
    
    
    
    1,187,352
    
    
    
    35.9
    
    
    
    
    
    
    
    Handpieces
    
    
    814,881
    
    
    
    56.4
    
    
    
    735,482
    
    
    
    72.5
    
    
    
    1,673,255
    
    
    
    50.5
    
    
    
    1,477,136
    
    
    
    72.1STA Handpieces
    
    
    6,111
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    42,094
    
    
    
    1.3
    
    
    
    
    
    
    
    Other
    
    
    18,581
    
    
    
    1.3
    
    
    
    48,450
    
    
    
    4.8
    
    
    
    68,239
    
    
    
    2.1
    
    
    
    120,997
    
    
    
    5.9Total Domestic
    
    $
    1,445,686
    
    
    
    100.0
    
    
    $
    1,014,000
    
    
    
    100.0
    
    
    $
    3,309,236
    
    
    
    100.0
    
    
    $
    2,049,995
    
    
    
    100.0INTERNATIONAL
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %CompuDent
    
    $
    (25,907
    )
    
    
    (8.0
    )
    
    $
    59,378
    
    
    
    14.4
    
    
    $
    70,121
    
    
    
    9.7
    
    
    $
    291,286
    
    
    
    31.1STA Unit
    
    
    20,774
    
    
    
    6.4
    
    
    
    
    
    
    
    
    
    
    
    20,774
    
    
    
    2.9
    
    
    
    
    
    
    
    Handpieces
    
    
    299,692
    
    
    
    92.3
    
    
    
    315,585
    
    
    
    76.6
    
    
    
    587,534
    
    
    
    81.2
    
    
    
    555,074
    
    
    
    59.3STA Handpieces
    
    
    12,986
    
    
    
    4.0
    
    
    
    
    
    
    
    
    
    
    
    12,987
    
    
    
    1.8
    
    
    
    
    
    
    
    Other
    
    
    17,106
    
    
    
    5.3
    
    
    
    36,858
    
    
    
    9.0
    
    
    
    31,712
    
    
    
    4.4
    
    
    
    90,385
    
    
    
    9.6Total International
    
    $
    324,651
    
    
    
    100.0
    
    
    $
    411,821
    
    
    
    100.0
    
    
    $
    723,128
    
    
    
    100.0
    
    
    $
    936,745
    
    
    
    100.0DOMESTIC/INTERNATIONAL ANALYSIS
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Domestic
    
    $
    1,445,686
    
    
    
    81.7
    
    
    $
    1,014,000
    
    
    
    71.1
    
    
    $
    3,309,236
    
    
    
    82.1
    
    
    $
    2,049,995
    
    
    
    68.6International
    
    
    324,651
    
    
    
    18.3
    
    
    
    411,821
    
    
    
    28.9
    
    
    
    723,128
    
    
    
    17.9
    
    
    
    936,745
    
    
    
    31.4Total Product Sales
    
    $
    1,770,337
    
    
    
    100.0
    
    
    $
    1,425,821
    
    
    
    100.0
    
    
    $
    4,032,364
    
    
    
    100.0
    
    
    $
    2,986,740
    
    
    
    100.0
  14




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CompuFlo
 CompuFlo
 CompuFlo
 Summary of Significant Accounting Policies
  Results of Operations
  Three months ended
    
    
    
    Six months endedJune 30, 2007
    
    
    
    
    
    June 30, 2006
    
    
    
    
    
    June 30, 2007
    
    
    
    
    
    June 30, 2006Product sales, net
    
    $
    1,770,337
    
    
    
    98
    %
    
    $
    1,425,821
    
    
    
    97
    %
    
    $
    4,032,364
    
    
    
    98
    %
    
    $
    2,986,740
    
    
    
    94
    %Royalty income
    
    
    35,834
    
    
    
    2
    %
    
    
    49,473
    
    
    
    3
    %
    
    
    83,770
    
    
    
    2
    %
    
    
    186,310
    
    
    
    6
    %Total revenue
    
    
    1,806,171
    
    
    
    100
    %
    
    
    1,475,294
    
    
    
    100
    %
    
    
    4,116,134
    
    
    
    100
    %
    
    
    3,173,050
    
    
    
    100
    %Cost of products sold
    
    
    955,274
    
    
    
    53
    %
    
    
    688,124
    
    
    
    47
    %
    
    
    1,786,484
    
    
    
    43
    %
    
    
    1,439,286
    
    
    
    45
    %Royalty expense
    
    
    (7,338
    )
    
    
    0
    %
    
    
    5,637
    
    
    
    0
    %
    
    
    (1,586
    )
    
    
    0
    %
    
    
    22,057
    
    
    
    1
    %Total cost of revenue
    
    
    947,936
    
    
    
    52
    %
    
    
    693,761
    
    
    
    47
    %
    
    
    1,784,898
    
    
    
    43
    %
    
    
    1,461,343
    
    
    
    46
    %Gross profit
    
    
    858,235
    
    
    
    48
    %
    
    
    781,533
    
    
    
    53
    %
    
    
    2,331,236
    
    
    
    57
    %
    
    
    1,711,707
    
    
    
    54
    %Selling, general and administrative expenses
    
    
    1,809,554
    
    
    
    100
    %
    
    
    1,369,497
    
    
    
    93
    %
    
    
    3,646,442
    
    
    
    89
    %
    
    
    2,849,212
    
    
    
    90
    %Research and development expenses
    
    
    121,398
    
    
    
    7
    %
    
    
    390,741
    
    
    
    26
    %
    
    
    299,964
    
    
    
    7
    %
    
    
    554,183
    
    
    
    17
    %Total operating expenses
    
    
    1,930,952
    
    
    
    107
    %
    
    
    1,760,238
    
    
    
    119
    %
    
    
    3,946,406
    
    
    
    96
    %
    
    
    3,403,395
    
    
    
    107
    %Loss from operations
    
    $
    (1,072,717
    )
    
    
    -59
    %
    
    $
    (978,705
    )
    
    
    -66
    %
    
    $
    (1,615,170
    )
    
    
    -39
    %
    
    $
    (1,691,688
    )
    
    
    -53
    %
 Three Months ended June 30, 2007 compared to three months ended June 30, 2006
 15




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##### Table of Contents



CompuDent
 Ionic White
 CompuDent
      Six months ended June 30, 2007 compared to the six months ended June 30, 2006
 CompuDent Ionic White
 16




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##### Table of Contents



Compudent
  CompuFlo
   Liquidity and Capital Resources
    17




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##### Table of Contents



ITEM 3. CONTROLS AND PROCEDURES
 a)
    
    Evaluation of Disclosure Controls and Procedures. Milestones management, with the
participation of the Chief Executive Officer and the Chief Financial Officer, carried out
an evaluation of the effectiveness of Milestones disclosure controls and procedures (as
defined in the Securities Exchange Act, Rule 13a-15(e) and 15d-15(e). Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that
Milestones disclosure controls and procedures were effective, as of the date of their
evaluation, for purposes of recording, processing, summarizing and timely reporting
material information required to be disclosed in reports filed by Milestone under the
Securities Exchange Act of 1934.b)
    
    Changes in Internal Control over Financial Reporting.There were no changes in our
internal controls over financial reporting that occurred during the period covered by this
report that have materially affected, or are reasonably likely to materially affect,
Milestones internal control over fiscal reporting.
 18




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##### Table of Contents



PART II
 
 ITEM 6.
    
    EXHIBITS
  31.1
    
    Chief Executive Officer Certification pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Acting Chief Financial Officer Certification pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Chief Executive Officer Certification pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Acting Chief Financial Officer Certification pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
 19




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##### Table of Contents



SIGNATURES
  MILESTONE SCIENTIFIC INC.
            Registrant/s/ Leonard OsserLeonard OsserChairman and Chief Executive Officer /s/ David CohnDavid CohnActing Chief Financial Officer  20