##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 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)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o 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




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##### 



PART I  FINANCIAL INFORMATIONItem 1. Finanacial StatementsCondensed Balance Sheets

March 31, 2011 (Unaudited) and December 31, 2010
    
    
    4Condensed Statements of Operations

Three Months Ended March 31, 2011 and 2010 (Unaudited)
    
    
    5Condensed Statements of Changes in Stockholders Equity (Unaudited)

Three Months Ended March 31, 2011 (Unaudited)
    
    
    6Condensed Statements of Cash Flow

Three Months Ended March 31, 2011 and 2010 (Unaudited)
    
    
    7Notes to Condensed Financial Statements (Unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    25PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregisterd Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. (Removed and Reserved)
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    27EX-31.1EX-31.2EX-32.1EX-32.2
   2




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##### Table of Contents



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 of 1933, as amended and Section 21E of the Security Exchange Act of 1934, as amended (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 the 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.
  3




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##### Table of Contents



March 31, 2011
    
    
    December 31, 2010(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    155,263
    
    
    $
    627,082Accounts receivable, net of allowance for doubtful accounts of $202,160 in 2011 and 2010
    
    
    1,380,195
    
    
    
    796,221Inventories
    
    
    850,708
    
    
    
    986,947Advances to contract manufacturer, current
    
    
    728,509
    
    
    
    730,491Prepaid expenses and other current assets
    
    
    243,304
    
    
    
    247,465Total current assets
    
    
    3,357,979
    
    
    
    3,388,206Accounts receivable-long term, net of allowance for doubtful accounts of $426,840 as of March 31, 2011
and $438,840 as of December 31, 2010
    
    
    273,160
    
    
    
    361,160Advances to contract manufacturer, non current
    
    
    2,227,837
    
    
    
    1,713,794Investment in distributor, at cost
    
    
    76,319
    
    
    
    76,319Furniture, Fixtures & Equipment net of accumulated depreciation of $431,769 as of March 31, 2011
and $426,482 as of December 31, 2010
    
    
    63,903
    
    
    
    66,936Patents, net of accumulated amortization of $316,239 as of March 31, 2011
and $294,934 as of December 31, 2010
    
    
    935,717
    
    
    
    944,858Other assets
    
    
    41,081
    
    
    
    57,750Total assets
    
    $
    6,975,996
    
    
    $
    6,609,023LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable  short term
    
    $
    2,885,994
    
    
    $
    2,883,587Accrued expenses and other payable
    
    
    649,771
    
    
    
    511,304Total current liabilities
    
    
    3,535,765
    
    
    
    3,394,891Long-term Liabilities:Accounts payable  long term
    
    
    710,162
    
    
    
    440,376Notes Payable-net of discount of $7,662 and $8,361, respectively
    
    
    442,338
    
    
    
    441,639Total long-term liabilities
    
    
    1,152,500
    
    
    
    882,015Commitments and ContingenciesStockholders EquityCommon stock, par value $.001; authorized 50,000,000 shares; 15,030,459 shares issued
642,847 shares to be issued and 14,997,126 shares outstanding as of March 31, 2011;
14,915,959 shares issued, 637,013 shares to be issued, and 14,882,626 shares outstanding
as of December 31, 2010
    
    
    15,673
    
    
    
    15,552Additional paid-in capital
    
    
    62,703,180
    
    
    
    62,606,043Accumulated deficit
    
    
    (59,519,606
    )
    
    
    (59,377,962
    )Treasury stock, at cost, 33,333 shares
    
    
    (911,516
    )
    
    
    (911,516
    )Total stockholders equity
    
    
    2,287,731
    
    
    
    2,332,117Total liabilities and stockholders equity
    
    $
    6,975,996
    
    
    $
    6,609,023
   4




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Three Months Ended March 31,2011
    
    
    2010Product sales, net
    
    $
    2,425,988
    
    
    $
    2,562,578Cost of products sold
    
    
    879,588
    
    
    
    900,712Gross profit
    
    
    1,546,400
    
    
    
    1,661,866Selling, general and administrative expenses
    
    
    1,624,255
    
    
    
    1,541,702Research and development expenses
    
    
    43,718
    
    
    
    88,464Total operating expenses
    
    
    1,667,973
    
    
    
    1,630,166(Loss) income from operations
    
    
    (121,573
    )
    
    
    31,700Other (expense) incomeOther income
    
    
    
    
    
    
    61,916Interest expense
    
    
    (19,386
    )
    
    
    (9,343
    )Amortization of debt issuance
    
    
    (699
    )
    
    
    (699
    )Interest income
    
    
    14
    
    
    
    348Total other (expenses) income
    
    
    (20,071
    )
    
    
    52,222Net (loss) income applicable to common stockholders
    
    $
    (141,644
    )
    
    $
    83,922Net (loss) income per share applicable to common stockholders -Basic
    
    $
    (0.01
    )
    
    $
    0.01Diluted
    
    $
    (0.01
    )
    
    $
    0.01Weighted average shares outstanding and to be issued -Basic
    
    
    14,875,541
    
    
    
    13,875,278Diluted
    
    
    14,875,541
    
    
    
    14,320,821
   5




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##### Table of Contents



AdditionalCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    TreasuryShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Stock
    
    
    TotalBalance, January 1, 2011
    
    
    15,552,972
    
    
    $
    15,552
    
    
    $
    62,606,043
    
    
    $
    (59,377,962
    )
    
    $
    (911,516
    )
    
    $
    2,332,117Options issued to employees and consultants
    
    
    
    
    
    
    
    
    
    
    53,674
    
    
    
    
    
    
    
    
    
    
    
    53,674Options exercised
    
    
    100,000
    
    
    
    100
    
    
    
    24,900
    
    
    
    
    
    
    
    
    
    
    
    25,000Common stock issued for payment of
consulting services to settle accounts payable
    
    
    7,000
    
    
    
    7
    
    
    
    6,993
    
    
    
    
    
    
    
    
    
    
    
    7,000Common stock issued for payment of
employee compensation
    
    
    7,500
    
    
    
    8
    
    
    
    7,492
    
    
    
    
    
    
    
    
    
    
    
    7,500Common stock to be issued for payment of
consulting services
    
    
    5,834
    
    
    
    6
    
    
    
    4,078
    
    
    
    
    
    
    
    
    
    
    
    4,084Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141,644
    )
    
    
    
    
    
    
    (141,644
    )Balance, March 31, 2011
    
    
    15,673,306
    
    
    $
    15,673
    
    
    $
    62,703,180
    
    
    $
    (59,519,606
    )
    
    $
    (911,516
    )
    
    $
    2,287,731
   6




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##### Table of Contents



THREE MONTHS ENDED MARCH 31,2011
    
    
    2010Cash flows from operating activities:Net (loss) income
    
    $
    (141,644
    )
    
    $
    83,922Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation expense
    
    
    5,287
    
    
    
    18,651Amortization of patents
    
    
    21,305
    
    
    
    20,410Amortization of debt discount
    
    
    699
    
    
    
    699Common stock and options issued for compensation, consulting
and vendor services
    
    
    72,258
    
    
    
    124,718Loss on sale/disposal of equipment
    
    
    
    
    
    
    Bad debt expense (Reversal)
    
    
    (12,000
    )
    
    
    Changes in operating assets and liabilities:(Increase) Decrease in accounts receivable
    
    
    (483,974
    )
    
    
    132,524Decrease (Increase) in inventories
    
    
    136,239
    
    
    
    (160,605
    )(Increase) to advances to contract manufacturer
    
    
    (512,061
    )
    
    
    (595,978
    )Decrease (Increase) to prepaid expenses and other current assets
    
    
    4,161
    
    
    
    (168,259
    )Decrease in other assets
    
    
    16,669
    
    
    
    17,365Increase in accounts payable
    
    
    272,193
    
    
    
    797,665Increase (Decrease) in accrued expenses
    
    
    138,467
    
    
    
    (22,675
    )Net cash (used in) provided by operating activities
    
    
    (482,401
    )
    
    
    248,437Cash flows from investing activities:Purchases of property and equipment
    
    
    (2,254
    )
    
    
    (19,844
    )Payment for patents rights
    
    
    (12,164
    )
    
    
    (39,695
    )Net cash used in investing activities
    
    
    (14,418
    )
    
    
    (59,539
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    25,000
    
    
    
    Net cash provided by financing activities
    
    
    25,000
    
    
    
    NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (471,819
    )
    
    
    188,898Cash and cash equivalents at beginning of period
    
    
    627,082
    
    
    
    1,029,129Cash and cash equivalents at end of period
    
    $
    155,263
    
    
    $
    1,218,027Supplemental disclosure of cash flow information:Interest paid
    
    $
    23,000
    
    
    $
    24,000
   7




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##### Table of Contents



MILESTONE SCIENTIFIC INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
 ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
        NOTE 1  SUMMARY OF ACCOUNTING POLICIES
 Cash and Cash Equivalents
   8




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Accounts Receivable
  Inventories
  Patents
  Accounts Payable
  Revenue Recognition
  Use of Estimates
   9




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Fair Value Measurements: Fair Value Measurements and
Disclosures
      Recent Accounting Pronouncements
 .
 Fair
Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements Fair Value Measurements and Disclosures
 Subsequent Events: Amendments to Certain
Recognition and Disclosure Requirements Subsequent
Events,
    10




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NOTE  2 BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE
  NOTE  3 ACCOUNTS RECEIVABLE  CURRENT AND LONG TERM
  NOTE  4 STOCK OPTION PLANS
 Share-Based Payment
  WeightedWeighted
    
    
    Average
    
    
    AggregateNumber
    
    
    Averaged
    
    
    Remaining
    
    
    Intrinsicof
    
    
    Exercise
    
    
    Contractual
    
    
    OptionsOptions
    
    
    Price
    
    
    Life (Years)
    
    
    ValueOutstanding, January 1, 2011
    
    
    928,504
    
    
    $
    1.07
    
    
    
    3.92
    
    
    $
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, March 31, 2011
    
    
    928,504
    
    
    
    1.07
    
    
    
    3.68
    
    
    
    36,666Exercisable, March 31, 2011
    
    
    473,397
    
    
    
    0.95
    
    
    
    2.49
    
    
    
    36,415
    11




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WeightedWeighted
    
    
    Average
    
    
    AggregateNumber
    
    
    Averaged
    
    
    Remaining
    
    
    Intrinsicof
    
    
    Exercise
    
    
    Contractual
    
    
    OptionsOptions
    
    
    Price
    
    
    Life (Years)
    
    
    ValueOutstanding, January 1, 2011
    
    
    534,999
    
    
    
    1.85
    
    
    
    1.51
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    100,000
    
    
    
    0.25
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    120,000
    
    
    
    1.75
    
    
    
    
    
    
    
    Outstanding, March 31, 2011
    
    
    314,999
    
    
    
    2.39
    
    
    
    1.84
    
    
    
    21,700Exercisable, March 31, 2011
    
    
    294,998
    
    
    
    2.47
    
    
    
    1.70
    
    
    
    21,700
    NOTE  5 CONCENTRATION OF CREDIT RISK
 CompuDent STA
Instruments
   12




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##### Table of Contents



NOTE  6 ADVANCES TO CONTRACT MANUFACTURER
  NOTE  7 LINE OF CREDIT AND NOTE PAYABLE
   NOTE  8 STOCK ISSUANCE
  NOTE  9 SIGNIFICANT CUSTOMERS
   13




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Three Months Ended March 31,2011
    
    
    2010Instruments
    
    $
    810,998
    
    
    $
    599,888Handpieces
    
    
    1,580,325
    
    
    
    1,936,303Other
    
    
    34,665
    
    
    
    26,387$
    2,425,988
    
    
    $
    2,562,578United States
    
    $
    1,312,566
    
    
    $
    1,204,972Canada
    
    
    153,124
    
    
    
    182,270Other Foreign
    
    
    960,298
    
    
    
    1,175,336$
    2,425,988
    
    
    $
    2,562,578
 NOTE  10 COMMITMENTS AND OTHER
 Contract Manufacturing Arrangement
 CompuDent, STA CompuMed The Wand The Wand
  Wand/STA Instruments
 Other Events
 CompuFlo
  14




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CompuFlo
  15




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  OVERVIEW
  
    
    Optimizing our tactical approach to product sales and marketing in
order to materially increase penetration of the global dental and
medical markets with our proprietary, patented Computer-Controlled
Local Anesthesia Delivery (C-CLAD) solution, the STA Single Tooth
Anesthesia Instrument(STA Instrument); and
    
    Identifying and pursing strategic collaborations with third parties to
jointly develop new products utilizing our patented CompuFlopressure
force technology for novel new medical applications.
 STA Instrument Awards  Industry Recognition
 STA Instrument Dentistry
Today STA Instrument STA Instrument Medical Device & Diagnostic Industry STA Instrument STA Instrument
 STA Instrument Dentaltown Magazine CompuDent/The Wand. Wand STA Instrument Dental Products Report DPR DPR DPRs STA Instrument
 STA Instrument
 Second Annual Symposium on C-CLAD
  
    
    The History of C-CLAD
    
    Treating with Connection
    
    Heart Rate Study
  16




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##### Table of Contents




    
    STACompassionate Care in the 21st Century
    
    Injection Advances and Challenges
    
    Physiologic and Clinical Characteristics of PDL Anesthesia Delivered
by a High Pressure Hand piece and a Computerized Device
    
    The STAfor Tots and Teens
    
    Computerized Local Anesthesia in Dentistry: A Review
    
    Todays Technology
    
    Managing a Successful Dental Practice: Why People Keep Coming Back
    
    STA The Dental Schools Perspective
    
    Futuristic Vistas: The Dentist/Hygienist Partnership
  STA System Growth
 STA System, , STA System STA
System Dental Economics STA System
 Global Distribution Network
 North America Market
 STA Instrument
  International Market
 Wand STA Instrument
 STA Instruments
  17




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##### Table of Contents



Wand/STA Instruments
  Wand STA Instrument, CompuDent
 Segmented Sales Performance
  Three Months Ended March 31,2011
    
    
    2010DOMESTICInstruments
    
    $
    355,972
    
    
    
    27.1
    %
    
    $
    251,597
    
    
    
    20.9
    %Handpieces
    
    
    936,049
    
    
    
    71.3
    %
    
    
    929,984
    
    
    
    77.2
    %Other
    
    
    20,545
    
    
    
    1.6
    %
    
    
    23,391
    
    
    
    1.9
    %Total Domestic
    
    $
    1,312,566
    
    
    
    100.0
    %
    
    $
    1,204,972
    
    
    
    100.0
    %INTERNATIONALInstruments
    
    $
    455,026
    
    
    
    40.9
    %
    
    $
    348,291
    
    
    
    25.7
    %Handpieces
    
    
    644,276
    
    
    
    57.9
    %
    
    
    1,006,319
    
    
    
    74.1
    %Other
    
    
    14,120
    
    
    
    1.2
    %
    
    
    2,996
    
    
    
    0.2
    %Total International
    
    $
    1,113,422
    
    
    
    100.0
    %
    
    $
    1,357,606
    
    
    
    100.0
    %DOMESTIC/INTERNATIONAL ANALYSISDomestic
    
    $
    1,312,566
    
    
    
    54.1
    %
    
    $
    1,204,972
    
    
    
    47.0
    %International
    
    
    1,113,422
    
    
    
    45.9
    %
    
    
    1,357,606
    
    
    
    53.0
    %Total Product Sales
    
    $
    2,425,988
    
    
    
    100.0
    %
    
    $
    2,562,578
    
    
    
    100.0
    %
   18




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New Product Development and Commercialization Utilizing CompuFlo Technology
  CompuFlo ® CompuFlo® DPS Dynamic Pressure Sensing ®
  In contrast, the technical advantages of the CompuFlo® system with DPS Dynamic Pressure
Sensing® technology are numerous and dramatic all
 
    
    a true painless experience for all injections
    
    eliminates disruptive injection behavior
    
    site specific targeting
    
    controlled needle exit-pressure
    
    precise flow rate and drug volumes
    
    patient treatment documentation
    
    superior ergonomics
    
    elimination of needle deflection (causing missed injections, lost time and anxiety )
    
    advanced tactile needle control
    
    precision fluid metering
  C-CLAD
  19




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CompuFlo® CompuFlo® CompuFlo®
 CompuFlo® STA Single Tooth Anesthesia System®
 CompuFlo®
 Intellectual Property
 STA Single Tooth Anesthesia System®, the CompuDent® CompuMed®
   C-CLAD
 Summary of Significant Accounting Policies, Judgments and Estimates
   20




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##### Table of Contents



Accounts Receivable
  Inventories
  Impairment of Long-Lived Assets
  Accounts Payable
  Revenue Recognition
  Results of Operations
 Wand STA Instruments CompuFlo
  21




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Three Months Ended March 312011
    
    
    2010Products sales, net
    
    $
    2,425,988
    
    
    
    100
    %
    
    $
    2,562,578
    
    
    
    100
    %Total revenue
    
    
    2,425,988
    
    
    
    100
    %
    
    
    2,562,578
    
    
    
    100
    %Cost of products sold
    
    
    879,588
    
    
    
    36
    %
    
    
    900,712
    
    
    
    35
    %Gross Profit
    
    
    1,546,400
    
    
    
    64
    %
    
    
    1,661,866
    
    
    
    65
    %Selling, general and
administrative expenses
    
    
    1,624,255
    
    
    
    67
    %
    
    
    1,541,702
    
    
    
    60
    %Research and development expenses
    
    
    43,718
    
    
    
    2
    %
    
    
    88,464
    
    
    
    3
    %Total operating expenses
    
    
    1,667,973
    
    
    
    69
    %
    
    
    1,630,166
    
    
    
    63
    %(Loss) income from operations
    
    
    (121,573
    )
    
    
    -5
    %
    
    
    31,700
    
    
    
    1
    %Total other (expenses) income
    
    
    (20,071
    )
    
    
    -1
    %
    
    
    52,222
    
    
    
    2
    %Net (loss) income
    
    $
    (141,644
    )
    
    
    -6
    %
    
    $
    83,922
    
    
    
    3
    %
 Three months ended March 31, 2011 compared to three months ended March 31, 2010
 STA Wand STA Instruments STA
   Wand STA Instrument
  22




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23




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Liquidity and Capital Resources
          24




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
    25




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   Shares
    
    
    $Shares issued for Employee Compensation
    
    
    7,500
    
    
    $
    7,500Shares issued for services
    
    
    12,834
    
    
    
    11,084Options exercised
    
    
    100,000
    
    
    
    25,000120,334
    
    
    $
    43,584
  
 ITEM 3. DEFAULT UPON SENIOR SECURTIES
  
 ITEM 4. (Removed and Reserved)
  
 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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##### Table of Contents



MILESTONE SCIENTIFIC INC./s/ Leonard OsserLeonard OsserChief Executive Officer/s/ Joseph DAgostinoJoseph DAgostinoChief Financial Officer   27