##### 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 March 31, 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 May 15, 2007, the Issuer had a total of 11,703,267 shares of Common Stock, $.001 par value,
outstanding.




---



##### 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




---



##### 



INDEX
 PAGEPART I.
    
    FINANCIAL INFORMATIONITEM 1.
    
    Financial Statements (unaudited)Condensed Balance SheetsMarch 31, 2007 (Unaudited) and December 31, 2006
    
    
    4Condensed Statements of OperationsThree Months Ended March 31, 2007 and 2006 (Unaudited)
    
    
    5Condensed Statements of Changes in Stockholders  Equity (Deficiency)Three Months Ended March 31, 2007 (Unaudited)
    
    
    6Condensed Statements of Cash FlowsThree Months Ended March 31, 2007 and 2006 (Unaudited)
    
    
    7Notes to Condensed Financial Statements
    
    
    8ITEM 2.
    
    Managements Discussion and Analysis or Plan of Operation
    
    
    11ITEM 3
    
    Controls and Procedures
    
    
    16PART II.
    
    OTHER INFORMATIONITEM 6.
    
    Exhibits
    
    
    17SIGNATURES
    
    
    
    
    18CERTIFICATIONS
    
    
    
    
    19EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  3




---



##### Table of Contents



March 31, 2007(Unaudited)
    
    
    December 31, 2006ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    451,202
    
    
    $
    1,160,116Accounts receivable , net of allowance for doubtful accounts of $21,441
in 2007 and $16,519 in 2006
    
    
    1,414,132
    
    
    
    346,619Royalty receivable
    
    
    47,936
    
    
    
    60,107Inventories
    
    
    1,224,412
    
    
    
    1,323,338Advances to contract manufacturer
    
    
    1,096,935
    
    
    
    1,077,871Prepaid expenses
    
    
    122,558
    
    
    
    97,073Total current assets
    
    
    4,357,175
    
    
    
    4,065,124Investment in distributor, at cost
    
    
    76,319
    
    
    
    76,319Equipment, net of accumulated depreciation of $427,767 as of March 31, 2007 and $402,914 as of December 31, 2006
    
    
    449,720
    
    
    
    459,259Patents, net of accumulated amortization of $47,651 as of March 31, 2007 and $41,939 as of December 31, 2006
    
    
    521,042
    
    
    
    526,753Other assets
    
    
    13,206
    
    
    
    14,153Total assets
    
    $
    5,417,462
    
    
    $
    5,141,608LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    1,462,020
    
    
    $
    1,196,107Accrued expenses
    
    
    449,137
    
    
    
    232,076Deferred compensation payable to officers
    
    
    44,497Total current liabilities
    
    
    1,955,654
    
    
    
    1,428,183Stockholders EquityCommon stock, par value $.001; authorized 50,000,000 shares; 11,707,637 shares issued, 337,036 shares to be
issued, and 11,674,304 shares outstanding
    
    
    12,046
    
    
    
    12,031Additional paid-in capital
    
    
    58,003,614
    
    
    
    57,720,129Accumulated deficit
    
    
    (53,642,336
    )
    
    
    (53,107,219
    )Treasury stock, at cost, 33,333 shares
    
    
    (911,516
    )
    
    
    (911,516
    )Total stockholders equity
    
    
    3,461,808
    
    
    
    3,713,425Total liabilities and stockholders equity
    
    $
    5,417,462
    
    
    $
    5,141,608
  4




---



##### Table of Contents



Three Months EndedMarch 31, 2007
    
    
    March 31, 2006Product sales, net
    
    $
    2,262,027
    
    
    $
    1,560,919Royalty income
    
    
    47,936
    
    
    
    136,837Total revenue
    
    
    2,309,963
    
    
    
    1,697,756Cost of products sold
    
    
    831,210
    
    
    
    751,162Royalty expense
    
    
    5,752
    
    
    
    16,421Total cost of revenue
    
    
    836,962
    
    
    
    767,583Gross profit
    
    
    1,473,001
    
    
    
    930,173Selling, general and administrative expenses
    
    
    1,836,888
    
    
    
    1,479,714Research and development expenses
    
    
    178,566
    
    
    
    163,442Total operating expenses
    
    
    2,015,454
    
    
    
    1,643,156Loss from operations
    
    
    (542,453
    )
    
    
    (712,983
    )Interest income
    
    
    7,336
    
    
    
    27,404Net loss applicable to common stockholders
    
    $
    (535,117
    )
    
    $
    (685,579
    )Loss per share applicable to common stockholders  basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.06
    )Weighted average shares outstanding and to be issued  basic and
diluted
    
    
    11,958,098
    
    
    
    11,741,578
  5




---



##### Table of Contents



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 for exercised options
    
    
    10,000
    
    
    
    10
    
    
    
    8,290
    
    
    
    
    
    
    
    
    
    
    
    8,300Common stock and options issued for
payment of consulting services
    
    
    
    
    
    
    
    
    
    
    240,438
    
    
    
    
    
    
    
    
    
    
    
    240,438Common stock and options issued for
payment of employee compensation
    
    
    5,001
    
    
    
    5
    
    
    
    34,757
    
    
    
    
    
    
    
    
    
    
    
    34,762Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (535,117
    )
    
    
    
    
    
    
    (535,117
    )Balance, March 31, 2007
    
    
    12,044,673
    
    
    $
    12,046
    
    
    $
    58,003,614
    
    
    $
    (53,642,336
    )
    
    $
    (911,516
    )
    
    $
    3,461,808
  6




---



##### Table of Contents



THREE MONTHS ENDED MARCH 31,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (535,117
    )
    
    $
    (685,579
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation expense
    
    
    24,853
    
    
    
    24,300Amortization of patents
    
    
    5,712
    
    
    
    5,712Common stock
issued for exercised options
    
    
    8,300
    
    
    
    Common stock and options issued for compensation, consulting,
and vendor services
    
    
    275,201
    
    
    
    91,058Other
    
    
    
    
    
    
    1,918Bad debt expense
    
    
    5,688
    
    
    
    7,743Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,073,202
    )
    
    
    (158,651
    )Royalty receivable
    
    
    12,171
    
    
    
    48,864Inventories
    
    
    98,926
    
    
    
    25,656Advances to contract manufacturer
    
    
    (19,064
    )
    
    
    (143,857
    )Prepaid expenses
    
    
    (25,485
    )
    
    
    11,040Other assets
    
    
    947
    
    
    
    2,514Accounts payable
    
    
    265,914
    
    
    
    122,615Accrued expenses
    
    
    217,059
    
    
    
    158,270Deferred compensation
    
    
    44,497
    
    
    
    43,333Net cash used in operating activities
    
    
    (693,600
    )
    
    
    (445,064
    )Cash flows from investing activities:Purchases of
property and equipment
    
    
    (15,314
    )
    
    
    Payment for patent rights
    
    
    
    
    
    
    (2,805
    )Net cash used in investing activities
    
    
    (15,314
    )
    
    
    (2,805
    )NET (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (708,914
    )
    
    
    (447,869
    )Cash and cash equivalents at beginning of period
    
    
    1,160,116
    
    
    
    2,892,679Cash and cash equivalents at end of period
    
    $
    451,202
    
    
    $
    2,444,810
  7




---



##### Table of Contents



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




---



##### Table of Contents



Share-Based Payment
    9




---



##### Table of Contents



WeightedWeighted
    
    AverageNumber
    
    Average
    
    Remaining
    
    Aggregateof
    
    Exercise
    
    Contractual
    
    IntrinsicOptions
    
    Options
    
    Price
    
    Life (Years)
    
    ValueOutstanding, January 1, 2007
    
    
    427,834
    
    
    
    1.83
    
    
    
    3.3
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (10,000
    )
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (45,167
    )
    
    
    0.00
    
    
    
    0.0
    
    
    
    Outstanding, March 31, 2007
    
    
    372,667
    
    
    
    1.83
    
    
    
    3.29
    
    
    
    516,652Exercisable, March 31, 2007
    
    
    250,889
    
    
    
    2.04
    
    
    
    3.06
    
    
    
    300,918
      WeightedWeighted
    
    
    Averageaverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    price of options
    
    
    Life (Years)
    
    
    ValueOutstanding, January 1, 2007
    
    
    522,466
    
    
    $
    3.51
    
    
    
    0
    
    
    
    Granted
    
    
    125,000
    
    
    
    1.75
    
    
    
    
    
    
    
    Exercised
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (8,333
    )
    
    
    4.92
    
    
    
    0
    
    
    
    Outstanding, March 31, 2007
    
    
    639,133
    
    
    
    3.15
    
    
    
    3.17
    
    
    
    Exercisable, March 31, 2007
    
    
    352,577
      
    
    
    3.47
    
    
    
  3.17
    
    
    
    
 10




---



##### Table of Contents



U
      
 ITEM 2. Managements Discussion and Analysis or Plan of Operation.
 OVERVIEW
  CompuFlo Single Tooth Anesthesia (STA) CompuFlo
 11




---



##### Table of Contents



STA CompuDent
 STA STA STA .
 STA STA STA STA
 CompuDent CompuDent
 STA CompuDent STA CompuDent CompuDent
  CompuFlo 12
    Table of Contents  CompuFlo CompuFlo
 STA STA CompuFlo
  Three Months Ended March 31,2007
    
    
    2006DOMESTICCompuDent
    
    $
    287,227
    
    
    
    15.1
    %
    
    $
    221,794
    
    
    
    21.4
    %STA units
    
    
    632,309
    
    
    
    33.2
    %
    
    
    
    
    
    
    0.0
    %Handpieces
    
    
    911,971
    
    
    
    47.9
    %
    
    
    741,654
    
    
    
    71.6
    %STA handpieces
    
    
    20,545
    
    
    
    1.1
    %
    
    
    0
    
    
    
    0.0
    %Other
    
    
    52,293
    
    
    
    2.7
    %
    
    
    72,547
    
    
    
    7.0
    %Total Domestic
    
    $
    1,904,344
    
    
    
    100.0
    %
    
    $
    1,035,995
    
    
    
    100.0
    %INTERNATIONALCompuDent
    
    $
    51,080
    
    
    
    14.3
    %
    
    $
    231,908
    
    
    
    44.2
    %Handpieces
    
    
    291,961
    
    
    
    81.6
    %
    
    
    239,146
    
    
    
    45.5
    %Other
    
    
    14,642
    
    
    
    4.1
    %
    
    
    53,870
    
    
    
    10.3
    %Total International
    
    $
    357,683
    
    
    
    100.0
    %
    
    $
    524,924
    
    
    
    100.0
    %DOMESTIC/INTERNATIONAL ANALYSISDomestic
    
    $
    1,904,344
    
    
    
    84.2
    %
    
    $
    1,035,995
    
    
    
    66.4
    %International
    
    
    357,683
    
    
    
    15.8
    %
    
    
    524,924
    
    
    
    33.6
    %Total Product Sales
    
    $
    2,262,027
    
    
    
    100.0
    %
    
    $
    1,560,919
    
    
    
    100.0
    %
 Summary of Significant Accounting Policies
  Results of Operations
  13
    Table of Contents  Three Months Ended March 312007
    
    
    2006Products sales, net
    
    $
    2,262,027
    
    
    
    98
    %
    
    $
    1,560,919
    
    
    
    92
    %Royalty income
    
    
    47,936
    
    
    
    2
    %
    
    
    136,837
    
    
    
    8
    %Total revenue
    
    
    2,309,963
    
    
    
    100
    %
    
    $
    1,697,756
    
    
    
    100
    %Cost of products sold
    
    
    831,210
    
    
    
    36
    %
    
    
    751,162
    
    
    
    44
    %Royalty expense
    
    
    5,752
    
    
    
    
    
    
    
    16,421
    
    
    
    Total cost of revenue
    
    
    836,962
    
    
    
    36
    %
    
    
    767,583
    
    
    
    45
    %Gross Profit
    
    
    1,473,001
    
    
    
    64
    %
    
    
    930,173
    
    
    
    55
    %Selling, general and
administrative expenses
    
    
    1,836,888
    
    
    
    79
    %
    
    
    1,479,714
    
    
    
    87
    %Research and
development expenses
    
    
    178,566
    
    
    
    8
    %
    
    
    163,442
    
    
    
    10
    %Total operating expenses
    
    
    2,015,454
    
    
    
    87
    %
    
    
    1,643,156
    
    
    
    97
    %Loss from operations
    
    
    (542,453
    )
    
    
    -23
    %
    
    
    (712,983
    )
    
    
    -42
    %Other income  interest
    
    
    7,336
    
    
    
    0
    %
    
    
    27,404
    
    
    
    2
    %Net loss
    
    $
    (535,117
    )
    
    
    -23
    %
    
    $
    (685,579
    )
    
    
    -40
    %
 Three Months ended March 31, 2007 compared to three months ended March 31, 2006
 CompuDent CompuDent Ionic White
 Ionic White
 14
    Table of Contents  CompuFlo
    Cash flow results
    Liquidity and Capital Resources
 15
    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.
 16
    Table of Contents  PART II
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   
 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.
 17
    Table of Contents  SIGNATURES
  MILESTONE SCIENTIFIC INC.
Registrant/s/Leonard OsserLeonard OsserChairman and Chief Executive Officer/s/David CohnDavid CohnChief Financial Officer  18