##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period endedMarch 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 001-14053
 MILESTONE SCIENTIFIC INC.
  Delaware
    
    13-3545623(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 220 South Orange Avenue, Livingston, New Jersey 07039
 (973) 535-2717  (Registrants telephone number, including area code)
 
   þ o
  Large accelerated filer
o
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
  o þ
 
  o o
 SEC1296 (02-08)
    
    Potential persons who are to respond to the collection of information contained in this form are not required
to respond unless the form displays a currently valid OMB control number.




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##### 



MILESTONE SCIENTIFIC INC
 INDEX
 PART I  FINANCIAL INFORMATIONItem 1. Financial Statements.Condensed Balance Sheets 
March 31, 2008 (Unaudited) and December 31, 2007Condensed Statements of Operations 
Three Months Ended March 31, 2008 and 2007 (Unaudited)Condensed Statements of Changes in Stockholders Equity (Deficiency) 
Three Months Ended March 31, 2008 (Unaudited)Condensed Statements of Cash Flow 
Three Months Ended March 31, 2008 and 2007 (Unaudited)Notes to Condensed Financial Statement (Unaudited)Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.Item 3. Quantitative and Qualitative Disclosures About Market Risk.Item 4. Controls and Procedures.PART II  OTHER INFORMATIONItem 1. Legal Proceedings.Item 1A. Risk Factors.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.Item 3. Defaults Upon Senior Securities.Item 4. Submission of Matters to a Vote of Security Holders.Item 5. Other Information.Item 6. Exhibits.SIGNATURESCERTIFICATIONSEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  2




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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 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.
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March 31, 2008
    
    
    December 31, 2007(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    237,716
    
    
    $
    745,003Accounts receivable , net of allowance for doubtful accounts of $5,000
in 2008 and 2007
    
    
    344,348
    
    
    
    346,347Royalty receivable
    
    
    14,163
    
    
    
    15,358Inventories
    
    
    1,338,572
    
    
    
    1,636,744Advances to contract manufacturer
    
    
    1,193,551
    
    
    
    1,192,584Prepaid expenses
    
    
    204,717
    
    
    
    169,727Total current assets
    
    
    3,333,067
    
    
    
    4,105,763Investment in distributor, at cost
    
    
    76,319
    
    
    
    76,319Equipment, net of accumulated depreciation of $302,885 as of March 31, 2008
and $284,145 as of December 31, 2007
    
    
    204,999
    
    
    
    220,808Patents, net of accumulated amortization of $90,441 of March 31, 2008
and $79,498 as of December 31, 2007
    
    
    645,193
    
    
    
    559,378Other assets
    
    
    24,551
    
    
    
    27,297Total assets
    
    $
    4,284,129
    
    
    $
    4,989,565LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    1,466,302
    
    
    $
    1,855,835Accrued expenses
    
    
    285,300
    
    
    
    201,103Deferred compensation payable to officers
    
    
    30,376
    
    
    
    15,833Total current liabilities
    
    
    1,781,978
    
    
    
    2,072,771Long-term Liabilities:Accounts payable-long term
    
    
    
    
    
    $
    443,847Line of credit-net of discount of $59,242 and $65,371, respectively
    
    
    940,758
    
    
    
    934,629Total long-term liabilities
    
    
    940,758
    
    
    
    1,378,476Commitments and ContingenciesStockholders EquityCommon stock, par value $.001; authorized 50,000,000 shares; 12,119,143 shares issued
504,639 shares to be issued, and 12,085,810 shares outstanding in 2008; 11,787,572
shares issued, 421,306 shares to be issued, and 11,754,239 shares outstanding in 2007
    
    
    12,625
    
    
    
    12,210Additional paid-in capital
    
    
    59,122,084
    
    
    
    58,483,539Accumulated deficit
    
    
    (56,661,800
    )
    
    
    (56,045,915
    )Treasury stock, at cost, 33,333 shares
    
    
    (911,516
    )
    
    
    (911,516
    )Total stockholders equity
    
    
    1,561,393
    
    
    
    1,538,318Total liabilities and stockholders equity
    
    $
    4,284,129
    
    
    $
    4,989,565
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Three Months Ended March 31,2008
    
    
    2007Product sales, net
    
    $
    1,387,990
    
    
    $
    2,262,027Royalty income
    
    
    14,163
    
    
    
    47,936Total revenue
    
    
    1,402,153
    
    
    
    2,309,963Cost of products sold
    
    
    463,924
    
    
    
    831,210Royalty expense
    
    
    
    
    
    
    5,752Total cost of revenue
    
    
    463,924
    
    
    
    836,962Gross profit
    
    
    938,229
    
    
    
    1,473,001Selling, general and administrative expenses
    
    
    1,471,978
    
    
    
    1,836,888Research and development expenses
    
    
    48,319
    
    
    
    178,566Total operating expenses
    
    
    1,520,297
    
    
    
    2,015,454Loss from operations
    
    
    (582,068
    )
    
    
    (542,453
    )Interest expense
    
    
    (30,924
    )
    
    
    Interest-Amortization of debt issuance
    
    
    (6,129
    )
    
    
    Interest income
    
    
    3,236
    
    
    
    7,336Net loss applicable to common stockholders
    
    $
    (615,885
    )
    
    $
    (535,117
    )Loss per share applicable to common stockholders -
basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.05
    )Weighted average shares outstanding and to be issued -
basic and diluted
    
    
    12,262,256
    
    
    
    11,958,098
  5




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AdditionalCommon Stock
    
    Paid-in
    
    Accumulated
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Deficit
    
    Stock
    
    TotalBalance, January 1, 2008
    
    
    12,208,878
    
    
    $
    12,210
    
    
    $
    58,483,539
    
    
    $
    (56,045,915
    )
    
    $
    (911,516
    )
    
    $
    1,538,318Options issued to employees and consultants
    
    
    
    
    
    
    
    
    
    
    34,281
    
    
    
    
    
    
    
    
    
    
    
    34,281Common stock issued for payment of services
    
    
    156,448
    
    
    
    157
    
    
    
    262,591
    
    
    
    
    
    
    
    
    
    
    
    262,748Common stock issued for payment of
consulting services
    
    
    165,780
    
    
    
    166
    
    
    
    225,933
    
    
    
    
    
    
    
    
    
    
    
    226,099Common stock issued for payment of
employee compensation
    
    
    9,314
    
    
    
    9
    
    
    
    15,823
    
    
    
    
    
    
    
    
    
    
    
    15,832Common stock to be issued for settlement of
deferred compensation
    
    
    83,333
    
    
    
    83
    
    
    
    99,917
    
    
    
    
    
    
    
    
    
    
    
    100,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (615,885
    )
    
    
    
    
    
    
    (615,885
    )Balance, March 31, 2008
    
    
    12,623,753
    
    
    $
    12,625
    
    
    $
    59,122,084
    
    
    $
    (56,661,800
    )
    
    $
    (911,516
    )
    
    $
    1,561,393
  6




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THREE MONTHS ENDED MARCH 31,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (615,885
    )
    
    $
    (535,117
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation expense
    
    
    18,740
    
    
    
    24,853Amortization of patents
    
    
    10,943
    
    
    
    5,712Amortization of debt discount
    
    
    6,129
    
    
    
    Common stock and options issued for compensation, consulting
and vendor services
    
    
    638,960
    
    
    
    283,501Bad debt expense
    
    
    
    
    
    
    5,688Changes in operating assets and liabilities:Decrease (increase) in accounts receivable
    
    
    1,999
    
    
    
    (1,073,202
    )Decrease in royalty receivable
    
    
    1,195
    
    
    
    12,171Decrease in inventories
    
    
    298,172
    
    
    
    98,926Increase to advances to contract manufacturer
    
    
    (967
    )
    
    
    (19,064
    )(Increase) to prepaid expenses and other current assets
    
    
    (34,990
    )
    
    
    (25,485
    )Decrease in other assets
    
    
    2,746
    
    
    
    947(Decrease) increase in accounts payable
    
    
    (833,380
    )
    
    
    265,914Increase in accrued expenses
    
    
    84,197
    
    
    
    217,059Increase in deferred compensation
    
    
    14,543
    
    
    
    44,497Net cash used in operating activities
    
    
    (407,598
    )
    
    
    (693,600
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (2,931
    )
    
    
    (15,314
    )Payment for patents rights
    
    
    (96,758
    )
    
    
    Net cash used in investing activities
    
    
    (99,689
    )
    
    
    (15,314
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (507,287
    )
    
    
    (708,914
    )Cash and cash equivalents at beginning of period
    
    
    745,003
    
    
    
    1,160,116Cash and cash equivalents at end of period
    
    $
    237,716
    
    
    $
    451,202Supplemental disclosure of cash flow information:Interest expense paid in cash
    
    
    
    
    
    
    Income taxes paid
    
    $
    3,140
    
    
    
    
  7




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MILESTONE SCIENTIFIC INC.
 
 NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE A  ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
         8




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NOTE B  SUMMARY OF ACCOUNTING POLICIES
            9




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.
  Share-Based Payment
  WeightedWeighted
    
    Average
    
    AggregateNumber
    
    Averaged
    
    Remaining
    
    Intrinsicof
    
    Exercise
    
    Contractual
    
    OptionsOptions
    
    Price
    
    Life (Years)
    
    ValueOutstanding, January 1, 2008
    
    
    391,334
    
    
    
    1.86
    
    
    
    2.54
    
    
    $
    108,800Granted
    
    
    33,333
    
    
    
    1.15
    
    
    
    4.86
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (36,334
    )
    
    
    1.20
    
    
    
    
    
    
    
    Outstanding, March 31, 2008
    
    
    388,333
    
    
    
    1.86
    
    
    
    3.01
    
    
    
    Exercisable, March 31, 2008
    
    
    293,111
    
    
    
    2.00
    
    
    
    2.61
    
    
    
    
     10




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WeightedWeighted
    
    Average
    
    AggregateNumber
    
    Averaged
    
    Remaining
    
    Intrinsicof
    
    Exercise
    
    Contractual
    
    OptionsOptions
    
    Price
    
    Life (Years)
    
    ValueOutstanding, January 1, 2008
    
    
    639,133
    
    
    
    3.15
    
    
    
    2.56
    
    
    $
    20,667Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (11,666
    )
    
    
    
    
    
    
    
    
    
    
    Outstanding, March 31, 2008
    
    
    627,467
    
    
    
    3.14
    
    
    
    2.36
    
    
    
    Exercisable, March 31, 2008
    
    
    502,467
    
    
    
    3.48
    
    
    
    1.99
    
    
    
    
      CompuDent
  11




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The Fair
Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB
Statement No. 115.
 Summary No. 141 (revised 2007)
 Non-controlling Interest in Consolidated Financial Statements- and amendment of ARB No. 51.
      12




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Three Months Ended March 31,2008
    
    
    2007CompuDent
    
    $
    134,189
    
    
    $
    338,307STA Units
    
    
    85,016
    
    
    
    632,309Handpieces
    
    
    1,141,750
    
    
    
    1,203,932STA Handpieces
    
    
    34,641
    
    
    
    20,545Other
    
    
    (7,606
    )
    
    
    66,934$
    1,387,990
    
    
    $
    2,262,027United States
    
    $
    897,715
    
    
    $
    1,904,344Canada
    
    
    160,322
    
    
    
    148,978Other Foreign
    
    
    329,953
    
    
    
    208,705$
    1,387,990
    
    
    $
    2,262,027
 STA CompuDent
 STA CompuDent CompuMed
  Contract Manufacturing Arrangement
 CompuDent CompuMed The Wand The Wand
  Other Commitments
 CoolBlue Ionic White
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Single Tooth Anesthesia (STA) System CompuDent STA System CompuDent
 Subsequent Events
  14




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis and Plan of Operation.
  OVERVIEW
  
    
    optimize our tactical approach to product sales and marketing in order to increase
penetration of the global dental and medical markets with our proprietary, patented
Computer-Controlled Local Anesthesia Delivery (CCLAD) solutions; and
    
    identify and pursue strategic collaborations with third parties to jointly develop new
products utilizing our CompuFlopressure force technology for novel, new dental and medical
applications.
  STA System STA
 STA System
 STA System STA System
 , , STA System rd STA Systems STA System
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STA System
 the STA System
 STA System STA System STA System Dentistry Today STA System
 STA System STA System
 CompuFlo CompuFlo CompuFlo
 CompuFlo
 CompuFlo
 STA
System CompuDent STA System
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CompuFlo
  Three Months Ended March 31,2008
    
    
    2007DOMESTICCompuDent
    
    $
    65,570
    
    
    
    7.3
    %
    
    $
    287,227
    
    
    
    15.1
    %STA units
    
    
    15,574
    
    
    
    1.7
    %
    
    
    632,309
    
    
    
    0.0
    %Handpieces
    
    
    793,818
    
    
    
    88.4
    %
    
    
    911,971
    
    
    
    82.2
    %STA handpieces
    
    
    31,091
    
    
    
    3.5
    %
    
    
    20,545
    
    
    
    0.0
    %Other
    
    
    (8,338
    )
    
    
    -0.9
    %
    
    
    52,292
    
    
    
    2.7
    %Total Domestic
    
    $
    897,715
    
    
    
    100.0
    %
    
    $
    1,904,344
    
    
    
    100.0
    %INTERNATIONALCompuDent
    
    $
    68,619
    
    
    
    14.0
    %
    
    $
    51,080
    
    
    
    14.3
    %STA units
    
    
    69,442
    
    
    
    14.2
    %
    
    
    
    
    
    
    0.0
    %Handpieces
    
    
    347,932
    
    
    
    71.0
    %
    
    
    291,961
    
    
    
    81.6
    %STA handpieces
    
    
    3,550
    
    
    
    0.7
    %
    
    
    0
    
    
    
    0.0
    %Other
    
    
    732
    
    
    
    0.1
    %
    
    
    14,642
    
    
    
    4.1
    %Total International
    
    $
    490,275
    
    
    
    100.0
    %
    
    $
    357,683
    
    
    
    100.0
    %DOMESTIC/INTERNATIONAL ANALYSISDomestic
    
    $
    897,715
    
    
    
    64.7
    %
    
    $
    1,904,344
    
    
    
    84.2
    %International
    
    
    490,275
    
    
    
    35.3
    %
    
    
    357,683
    
    
    
    15.8
    %Total Product Sales
    
    $
    1,387,990
    
    
    
    100.0
    %
    
    $
    2,262,027
    
    
    
    100.0
    %
  Technology Rights
 SafetyWand CompuFlo CompuDent
 Summary of Significant Accounting Policies, Judgments and Estimates
  17




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Accounts Receivable
  Inventories
  Impairment of Long-Lived Assets
  Revenue Recognition
   Use of Estimates
 .
 Results of Operations
 STA System CompuFlo
  18




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Three Months Ended March 312008
    
    
    2007Products sales, net
    
    $
    1,387,990
    
    
    
    99
    %
    
    $
    2,262,027
    
    
    
    98
    %Royalty income
    
    
    14,163
    
    
    
    1
    %
    
    
    47,936
    
    
    
    2
    %Total revenue
    
    
    1,402,153
    
    
    
    100
    %
    
    $
    2,309,963
    
    
    
    100
    %Cost of products sold
    
    
    463,924
    
    
    
    33
    %
    
    
    831,210
    
    
    
    36
    %Royalty expense
    
    
    
    
    
    
    
    
    
    
    5,752
    
    
    
    0
    %Total cost of revenue
    
    
    463,924
    
    
    
    33
    %
    
    
    836,962
    
    
    
    36
    %Gross Profit
    
    
    938,229
    
    
    
    67
    %
    
    
    1,473,001
    
    
    
    64
    %Selling, general and
administrative expenses
    
    
    1,471,978
    
    
    
    105
    %
    
    
    1,836,888
    
    
    
    79
    %Research and
development expenses
    
    
    48,319
    
    
    
    3
    %
    
    
    178,566
    
    
    
    8
    %Total operating expenses
    
    
    1,520,297
    
    
    
    108
    %
    
    
    2,015,454
    
    
    
    87
    %Loss from operations
    
    
    (582,068
    )
    
    
    -42
    %
    
    
    (542,453
    )
    
    
    -23
    %Other income  interest & expense
    
    
    (33,817
    )
    
    
    -2
    %
    
    
    7,336
    
    
    
    0
    %Net loss
    
    $
    (615,885
    )
    
    
    -44
    %
    
    $
    (535,117
    )
    
    
    -23
    %
 Three months ended March 31, 2008 compared to three months ended March 31, 2007
  Ionic White
  STA System
 STA
 19




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Liquidity and Capital Resources
      20




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
 Item 4. Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
  21




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 STA CompuDent ® ® ®
 inter alia STA  Compudent 
 
 ITEM 1A. RISK FACTORS
  We have no history of profitable operations. Continuing losses could exhaust our capital resources
and force us to discontinue operations.
  22




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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   Shares
    
    
    $Shares issued for Employee Compensation
    
    
    9,314
    
    
    $
    15,832Shares issued to Vendors for services
    
    
    156,448
    
    
    
    262,748Shares issued for services
    
    
    165,780
    
    
    
    226,099331,542
    
    
    $
    504,679
   
 ITEM 3. DEFAULT UPON SENIOR SECURTIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  31.1
    
    Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Chief Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
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MILESTONE SCIENTIFIC INC./s/ Joe W. Martin

Joe W. MartinChief Executive Officer/s/ Joseph DAgostino

Joseph DAgostinoChief Financial Officer