##### 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 September 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 Number001-14053
 MILESTONE SCIENTIFIC INC.
  Delaware
State or other jurisdiction 
or organization)
    
    13-3545623
(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 15(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 November 6, 2007, the Issuer had a total of 11,787,602 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 StatementsCondensed Balance Sheets September 30, 2007 (Unaudited) and December 31, 2006
    
    
    4Condensed Statements of Operations Three and Nine Months Ended September 30, 2007 and 2006 (Unaudited)
    
    
    5Condensed Statements of Changes in Stockholders Equity Nine Months Ended September 30, 2007 (Unaudited)
    
    
    6Condensed Statements of Cash Flows Nine Months Ended September 30, 2007 and 2006 (Unaudited)
    
    
    7Notes to Condensed Financial Statements (Unaudited)
    
    
    8ITEM 2.
    
    Managements Discussion and Analysis or Plan of Operation
    
    
    13ITEM 3
    
    Controls and Procedures
    
    
    19PART II. OTHER INFORMATIONITEM 6.
    
    Exhibits
    
    
    20SIGNATURES
    
    
    21CERTIFICATIONSEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  3




---



##### Table of Contents



September 30, 2007(Unaudited)
    
    
    December 31, 2006ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    44,783
    
    
    $
    1,160,116Accounts receivable, net of allowance for doubtful accounts of $5,000
in 2007 and $16,519 in 2006
    
    
    594,779
    
    
    
    346,619Royalty receivable
    
    
    28,976
    
    
    
    60,107Inventories
    
    
    1,657,256
    
    
    
    1,323,338Advances to contract manufacturer
    
    
    1,020,480
    
    
    
    1,077,871Prepaid expenses
    
    
    72,278
    
    
    
    97,073Total current assets
    
    
    3,418,552
    
    
    
    4,065,124Investment in distributor, at cost
    
    
    76,319
    
    
    
    76,319Equipment, net of accumulated depreciation of $297,891 in 2007 and $402,914 in 2006
    
    
    234,632
    
    
    
    459,259Patents, net of accumulated amortization of $59,075 in 2007 and $41,938 in 2006
    
    
    598,510
    
    
    
    526,753Other assets
    
    
    27,442
    
    
    
    14,153Total assets
    
    $
    4,355,455
    
    
    $
    5,141,608LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    2,122,600
    
    
    $
    1,196,107Accrued expenses
    
    
    98,407
    
    
    
    232,076Deferred compensation payable to officers
    
    
    130,000
    
    
    
    Total current liabilities
    
    
    2,351,007
    
    
    
    1,428,183Long-term Liabilities:Line of credit  net of discount of $24,072
    
    
    375,928
    
    
    
    Total Long-term liabilities
    
    
    375,928
    
    
    
    Stockholders EquityCommon stock, par value $.001; authorized 50,000,000 shares; 11,777,849 shares
issued, 337,036 reserved for issuance, and 11,744,516 shares outstanding in 2007;
11,692,636 shares issued, 337,036 reserved for issuance, and 11,659,303
shares outstanding in 2006
    
    
    12,116
    
    
    
    12,031Additional paid-in capital
    
    
    58,220,962
    
    
    
    57,720,129Accumulated deficit
    
    
    (55,693,042
    )
    
    
    (53,107,219
    )Treasury stock, at cost, 33,333 shares
    
    
    (911,516
    )
    
    
    (911,516
    )Total stockholders equity
    
    
    1,628,520
    
    
    
    3,713,425Total liabilities and stockholders equity
    
    $
    4,355,455
    
    
    $
    5,141,608
  4




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Product sales, net
    
    $
    1,134,468
    
    
    $
    1,189,988
    
    
    $
    5,166,832
    
    
    $
    4,176,728Royalty income
    
    
    28,977
    
    
    
    31,335
    
    
    
    112,747
    
    
    
    217,645Total revenue
    
    
    1,163,445
    
    
    
    1,221,323
    
    
    
    5,279,579
    
    
    
    4,394,373Cost of products sold
    
    
    631,584
    
    
    
    519,284
    
    
    
    2,418,068
    
    
    
    1,958,571Royalty expense
    
    
    (1,675
    )
    
    
    3,760
    
    
    
    (3,261
    )
    
    
    25,818Total cost of revenue
    
    
    629,909
    
    
    
    523,044
    
    
    
    2,414,807
    
    
    
    1,984,389Gross profit
    
    
    533,536
    
    
    
    698,279
    
    
    
    2,864,772
    
    
    
    2,409,984Selling, general and administrative expenses
    
    
    1,233,234
    
    
    
    1,132,776
    
    
    
    4,879,676
    
    
    
    3,981,988Research and development expenses
    
    
    45,574
    
    
    
    206,057
    
    
    
    345,538
    
    
    
    760,239Total operating expenses
    
    
    1,278,808
    
    
    
    1,338,833
    
    
    
    5,225,214
    
    
    
    4,742,227Loss from operations
    
    
    (745,272
    )
    
    
    (640,554
    )
    
    
    (2,360,442
    )
    
    
    (2,332,243
    )Gain/Loss on Disposal of Assets
    
    
    (232,259
    )
    
    
    
    
    
    
    (232,259
    )Interest expense
    
    
    (5,599
    )
    
    
    
    
    
    
    (5,599
    )
    
    
    Interest income
    
    
    1,342
    
    
    
    19,497
    
    
    
    12,477
    
    
    
    71,591Net loss
    
    $
    (981,788
    )
    
    $
    (621,057
    )
    
    $
    (2,585,823
    )
    
    $
    (2,260,652
    )Loss per share  basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.05
    )
    
    $
    (0.21
    )
    
    $
    (0.19
    )Weighted average shares outstanding and to
be issued  basic and diluted
    
    
    12,096,518
    
    
    
    11,790,251
    
    
    
    12,077,642
    
    
    
    11,767,101
  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 from
exercise of stock options
    
    
    66,667
    
    
    
    67
    
    
    
    71,134
    
    
    
    
    
    
    
    
    
    
    
    71,201Common stock and options issued for
consulting services
    
    
    
    
    
    
    
    
    
    
    253,435
    
    
    
    
    
    
    
    
    
    
    
    253,435Common stock and options issued for
payment of employee compensation
    
    
    18,546
    
    
    
    18
    
    
    
    151,707
    
    
    
    
    
    
    
    
    
    
    
    151,725Warrants issued in connection with
the line of credit
    
    
    
    
    
    
    
    
    
    
    24,557
    
    
    
    
    
    
    
    
    
    
    
    24,557Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,585,823
    )
    
    
    
    
    
    
    (2,585,823
    )Balance, September 30, 2007
    
    
    12,114,885
    
    
    $
    12,116
    
    
    $
    58,220,962
    
    
    $
    (55,693,042
    )
    
    $
    (911,516
    )
    
    $
    1,628,520
 6




---



##### Table of Contents



NINE MONTHS ENDED SEPTEMBER 30,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (2,585,823
    )
    
    $
    (2,260,652
    )Adjustments to reconcile net loss to net cash used in operating
activities:Depreciation expense
    
    
    85,604
    
    
    
    73,245Amortization of patents
    
    
    17,136
    
    
    
    17,136Amortization of debt discount
    
    
    485
    
    
    
    Common stock and options issued for compensation and consulting
    
    
    405,160
    
    
    
    213,862Bad debt expense
    
    
    69,378
    
    
    
    10,432Loss on disposal of equipment
    
    
    232,259
    
    
    
    2,634Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (317,538
    )
    
    
    21,882Decrease (increase) in royalty receivable
    
    
    31,131
    
    
    
    185,702Decrease (increase) in inventories
    
    
    (341,900
    )
    
    
    (84,574
    )Increase (decrease) in advances to contract manufacturer
    
    
    57,391
    
    
    
    (11,533
    )Decrease (increase) in prepaid expenses
    
    
    24,795
    
    
    
    52,193Decrease (increase)in other assets
    
    
    (13,289
    )
    
    
    7,542Increase (decrease)in accounts payable
    
    
    926,493
    
    
    
    186,776Increase (decrease) in accrued expenses
    
    
    (133,669
    )
    
    
    (3,360
    )Increase (decrease) in deferred compensation
    
    
    130,000
    
    
    
    162,081Net cash used in operating activities
    
    
    (1,412,387
    )
    
    
    (1,426,634
    )Cash flows from investing activities:Purchase of equipment
    
    
    (85,254
    )
    
    
    (13,180
    )Payment for patent rights
    
    
    (88,893
    )
    
    
    (28,098
    )Net cash used in investing activities
    
    
    (174,147
    )
    
    
    (41,278
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    71,201
    
    
    
    Long term borrowing-other
    
    
    400,000
    
    
    
    Net cash provided by financing activities
    
    
    471,201
    
    
    
    NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,115,333
    )
    
    
    (1,467,912
    )Cash and cash equivalents at beginning of period
    
    
    1,160,116
    
    
    
    2,892,679Cash and cash equivalents at end of period
    
    $
    44,783
    
    
    $
    1,424,767Supplemental disclosure of cash flow information:Stock issued to employees in lieu of cash compensation
    
    $
    44,693
    
    
    $
    51,250Interest expenses paid in cash
    
    $
    4,000
    
    
    
    Warrants issued in connection with the line of credit
    
    $
    24,557
    
    
    
    
 7




---



##### Table of Contents



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




---



##### Table of Contents



MILESTONE SCIENTIFIC INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
    Ionic White
        9




---



##### Table of Contents



MILESTONE SCIENTIFIC INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
    Share-Based Payment
    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
    
    
    (66,667
    )
    
    
    1.62
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (49,833
    )
    
    
    2.54
    
    
    
    
    
    
    
    Outstanding, September 30, 2007
    
    
    391,334
    
    
    $
    1.77
    
    
    
    3.20
    
    
    $
    156,900Exercisable, September 30, 2007
    
    
    314,334
    
    
    $
    1.82
    
    
    
    2.91
    
    
    $
    138,750
    10




---



##### Table of Contents



MILESTONE SCIENTIFIC INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(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, September 30, 2007
    
    
    639,133
    
    
    $
    3.15
    
    
    
    2.81
    
    
    $
    32,000Exercisable, September 30, 2007
    
    
    489,133
    
    
    $
    3.49
    
    
    
    2.49
    
    
    $
    3,000
       11




---



##### Table of Contents



MILESTONE SCIENTIFIC INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
     Single Tooth Anesthesia (STA  CompuDent® STA  Compudent®
   12




---



##### 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
 STA STA
 STA STA
 13




---



##### Table of Contents



STA 
 CompuDent ® CompuDent ® CompuDent ® ®
 CompuDent® CompuDent® ®
 STA STA STA
  14




---



##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006DOMESTIC
    
    
    
    
    
    %
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %CompuDent
    
    $
    39,266
    
    
    
    5.9
    
    
    $
    223,698
    
    
    
    21.7
    
    
    $
    335,007
    
    
    
    8.4
    
    
    $
    675,560
    
    
    
    21.9STA Units
    
    
    73,220
    
    
    
    10.9
    
    
    
    
    
    
    
    
    
    
    
    1,260,572
    
    
    
    31.8
    
    
    
    
    
    
    
    CompuDent Handpieces
    
    
    512,350
    
    
    
    76.6
    
    
    
    773,673
    
    
    
    75.0
    
    
    
    2,220,556
    
    
    
    55.9
    
    
    
    2,250,810
    
    
    
    73.0STA Handpieces
    
    
    33,148
    
    
    
    5.0
    
    
    
    
    
    
    
    
    
    
    
    75,179
    
    
    
    1.9
    
    
    
    
    
    
    
    Other
    
    
    11,174
    
    
    
    1.6
    
    
    
    33,682
    
    
    
    3.3
    
    
    
    77,523
    
    
    
    2.0
    
    
    
    157,200
    
    
    
    5.1Total Domestic
    
    $
    669,158
    
    
    
    100.0
    
    
    $
    1,031,053
    
    
    
    100.0
    
    
    $
    3,968,837
    
    
    
    100.0
    
    
    $
    3,083,570
    
    
    
    100.0INTERNATIONAL
    
    
    
    
    
    %
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %CompuDent
    
    $
    113,197
    
    
    
    24.3
    
    
    $
    45,590
    
    
    
    28.7
    
    
    $
    184,618
    
    
    
    15.4
    
    
    $
    336,876
    
    
    
    30.8STA Unit
    
    
    73,336
    
    
    
    15.8
    
    
    
    
    
    
    
    
    
    
    
    92,810
    
    
    
    7.8
    
    
    
    
    
    
    
    CompuDent Handpieces
    
    
    267,766
    
    
    
    57.5
    
    
    
    100,162
    
    
    
    63.0
    
    
    
    863,490
    
    
    
    72.1
    
    
    
    655,236
    
    
    
    60.0STA Handpieces
    
    
    12,549
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    25,536
    
    
    
    2.1
    
    
    
    
    
    
    
    Other
    
    
    (1,538
    )
    
    
    (0.3
    )
    
    
    13,183
    
    
    
    8.3
    
    
    
    31,541
    
    
    
    2.6
    
    
    
    101,046
    
    
    
    9.2Total International
    
    $
    465,310
    
    
    
    100.0
    
    
    $
    158,935
    
    
    
    100.0
    
    
    $
    1,197,995
    
    
    
    100.0
    
    
    $
    1,093,158
    
    
    
    100.0DOMESTIC/INTERNATIONAL
    
    
    
    
    
    %
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %ANALYSISDomestic
    
    $
    669,158
    
    
    
    59.0
    
    
    $
    1,031,053
    
    
    
    86.6
    
    
    $
    3,968,837
    
    
    
    76.8
    
    
    $
    3,083,570
    
    
    
    73.8International
    
    
    465,310
    
    
    
    41.0
    
    
    
    158,935
    
    
    
    13.4
    
    
    
    1,197,995
    
    
    
    23.2
    
    
    
    1,093,158
    
    
    
    26.2Total Product Sales
    
    $
    1,134,468
    
    
    
    100.0
    
    
    $
    1,189,988
    
    
    
    100.0
    
    
    $
    5,166,832
    
    
    
    100.0
    
    
    $
    4,176,728
    
    
    
    100.0
  CompuFlo
  Summary of Significant Accounting Policies
  STA  CompuDent ®
 15




---



##### Table of Contents



Results of Operations
  Three Months Ended
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    
    
    
    September 30,
    
    
    
    
    
    September 30,
    
    
    
    
    
    September 30,2007
    
    
    
    
    
    2006
    
    
    
    
    
    2007
    
    
    
    
    
    2006Product sales, net
    
    $
    1,134,468
    
    
    
    98
    %
    
    $
    1,189,988
    
    
    
    97
    %
    
    $
    5,166,832
    
    
    
    98
    %
    
    $
    4,176,728
    
    
    
    95
    %Royalty income
    
    
    28,977
    
    
    
    2
    %
    
    
    31,335
    
    
    
    3
    %
    
    
    112,747
    
    
    
    2
    %
    
    
    217,645
    
    
    
    5
    %Total revenue
    
    
    1,163,445
    
    
    
    100
    %
    
    
    1,221,323
    
    
    
    100
    %
    
    
    5,279,579
    
    
    
    100
    %
    
    
    4,394,373
    
    
    
    100
    %Cost of products sold
    
    
    631,584
    
    
    
    54
    %
    
    
    519,284
    
    
    
    43
    %
    
    
    2,418,068
    
    
    
    46
    %
    
    
    1,958,571
    
    
    
    45
    %Royalty expense
    
    
    (1,675
    )
    
    
    0
    %
    
    
    3,760
    
    
    
    0
    %
    
    
    (3,261
    )
    
    
    0
    %
    
    
    25,818
    
    
    
    1
    %Total cost of revenue
    
    
    629,909
    
    
    
    54
    %
    
    
    523,044
    
    
    
    43
    %
    
    
    2,414,807
    
    
    
    46
    %
    
    
    1,984,389
    
    
    
    45
    %Gross profit
    
    
    533,536
    
    
    
    46
    %
    
    
    698,279
    
    
    
    57
    %
    
    
    2,864,772
    
    
    
    54
    %
    
    
    2,409,984
    
    
    
    55
    %Selling, general and administrative expenses
    
    
    1,233,234
    
    
    
    106
    %
    
    
    1,132,776
    
    
    
    93
    %
    
    
    4,879,676
    
    
    
    92
    %
    
    
    3,981,988
    
    
    
    91
    %Research and development expenses
    
    
    45,574
    
    
    
    4
    %
    
    
    206,057
    
    
    
    17
    %
    
    
    345,538
    
    
    
    7
    %
    
    
    760,239
    
    
    
    17
    %Total operating expenses
    
    
    1,278,808
    
    
    
    110
    %
    
    
    1,338,833
    
    
    
    110
    %
    
    
    5,225,214
    
    
    
    99
    %
    
    
    4,742,227
    
    
    
    108
    %
 Three months ended September 30, 2007 compared to the three months ended September 30, 2006
 ® ® Ionic White
 16




---



##### Table of Contents



CompuDent®
        Nine months ended September 30, 2007 compared to the nine months ended September 30, 2006
 CompuDent® ® ®
 17




---



##### Table of Contents



Ionic White
 CompuDent®
  CompuFlo®
     Liquidity and Capital Resources
   18




---



##### Table of Contents



® ®
 
 ITEM 3. CONTROLS AND PROCEDURES
  19




---



##### Table of Contents



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.
 20




---



##### Table of Contents



SIGNATURES
  MILESTONE SCIENTIFIC INC.
Registrant/s/ Leonard OsserLeonard OsserChairman and Chief Executive Officer/s/ Arthur L. GoldbergArthur L. GoldbergActing Chief Financial Officer  21