##### 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, 2009
 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
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ
 
 o o




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##### 



MILESTONE SCIENTIFIC INC
  
 INDEX
 PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Balance Sheets
March 31, 2009 (Unaudited) and December 31, 2008
    
    
    4Condensed Statements of Operations
Three Months Ended March 31, 2009 and 2008 (Unaudited)
    
    
    5Condensed Statements of Changes in Stockholders Equity (Deficiency)
Three Months Ended March 31, 2009 (Unaudited)
    
    
    6Condensed Statements of Cash Flow
Three Months Ended March 31, 2009 and 2008 (Unaudited)
    
    
    7Notes to Condensed Financial Statement (Unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    21PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    23SIGNATURES
    
    
    24EX-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 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 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, 2009
    
    
    December 31, 2008(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    500,668
    
    
    $
    743,665Accounts receivable, net of allowance for doubtful accounts of $5,000 in 2009 and 2008
    
    
    1,098,529
    
    
    
    925,742Inventories
    
    
    647,676
    
    
    
    719,902Advances to contract manufacturer
    
    
    124,950
    
    
    
    250,110Prepaid expenses and other current assets
    
    
    229,216
    
    
    
    218,296Total current assets
    
    
    2,601,039
    
    
    
    2,857,715Advances to contract manufacturer
    
    
    415,780
    
    
    
    415,780Investment in distributor, at cost
    
    
    76,319
    
    
    
    76,319Furniture, Fixtures & Equipment net of accumulated depreciation of $360,880
as of March 31 ,2009 and $345,377 as of December 31, 2008
    
    
    167,202
    
    
    
    152,574Patents, net of accumulated amortization of $153,687 as of March 31, 2009
and $135,406 as of December 31, 2008
    
    
    895,373
    
    
    
    901,045Other assets
    
    
    7,317
    
    
    
    7,317Total assets
    
    $
    4,163,030
    
    
    $
    4,410,750LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    1,077,752
    
    
    $
    829,130Accrued expenses and other payable
    
    
    332,330
    
    
    
    495,897Total current liabilities
    
    
    1,410,082
    
    
    
    1,325,027Long-term Liabilities:Line of credit-net of discount of $43,328 and $50,504, respectively
    
    
    1,256,672
    
    
    
    1,249,496Notes Payable-net of discount of $13,254 and $13,953, respectively
    
    
    436,746
    
    
    
    436,047Total long-term liabilities
    
    
    1,693,418
    
    
    
    1,685,543Commitments and ContingenciesStockholders EquityCommon stock, par value $.001; authorized 50,000,000 shares; 13,023,661 shares issued
566,309 shares to be issued and 12,990,328 shares outstanding as of March 31, 2009;
12,695,685 shares issued, 504,639 shares to be issued, and 12,662,352 shares outstanding
as of December 31, 2008
    
    
    13,589
    
    
    
    13,200Additional paid-in capital
    
    
    59,752,468
    
    
    
    59,531,865Accumulated deficit
    
    
    (57,795,011
    )
    
    
    (57,233,369
    )Treasury stock, at cost, 33,333 shares
    
    
    (911,516
    )
    
    
    (911,516
    )Total stockholders equity
    
    
    1,059,530
    
    
    
    1,400,180Total liabilities and stockholders equity
    
    $
    4,163,030
    
    
    $
    4,410,750
   4




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Three Months Ended March 31,2009
    
    
    2008Product sales, net
    
    $
    2,204,819
    
    
    $
    1,387,990Royalty income
    
    
    
    
    
    
    14,163Total revenue
    
    
    2,204,819
    
    
    
    1,402,153Cost of products sold
    
    
    916,550
    
    
    
    463,924Total cost of revenue
    
    
    916,550
    
    
    
    463,924Gross profit
    
    
    1,288,269
    
    
    
    938,229Selling, general and administrative expenses
    
    
    1,728,815
    
    
    
    1,471,978Research and development expenses
    
    
    67,622
    
    
    
    48,319Total operating expenses
    
    
    1,796,437
    
    
    
    1,520,297Loss from operations
    
    
    (508,168
    )
    
    
    (582,068
    )Interest expense
    
    
    (47,403
    )
    
    
    (30,924
    )Interest-Amortization of debt issuance
    
    
    (7,875
    )
    
    
    (6,129
    )Interest income
    
    
    1,804
    
    
    
    3,236Net loss applicable to common stockholders
    
    $
    (561,642
    )
    
    $
    (615,885
    )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
    
    
    12,458,115
    
    
    
    12,262,256
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AdditionalCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    TreasuryShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Stock
    
    
    TotalBalance, January 1, 2009
    
    
    13,200,324
    
    
    $
    13,200
    
    
    $
    59,531,865
    
    
    $
    (57,233,369
    )
    
    $
    (911,516
    )
    
    $
    1,400,180Options issued to employees and consultants
    
    
    
    
    
    
    
    
    
    
    22,668
    
    
    
    
    
    
    
    
    
    
    
    22,668Common stock issued for payment of
consulting services to settle accounts payable
    
    
    74,634
    
    
    
    75
    
    
    
    41,925
    
    
    
    
    
    
    
    
    
    
    
    42,000Common stock to be issued for payment of
consulting services to settle accounts payable
    
    
    16,216
    
    
    
    16
    
    
    
    5,984
    
    
    
    
    
    
    
    
    
    
    
    6,000Common stock issued for payment of
employee compensation
    
    
    253,342
    
    
    
    253
    
    
    
    125,071
    
    
    
    
    
    
    
    
    
    
    
    125,324Common stock to be issued for settlement of
deferred compensation
    
    
    45,454
    
    
    
    45
    
    
    
    24,955
    
    
    
    
    
    
    
    
    
    
    
    25,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (561,642
    )
    
    
    
    
    
    
    (561,642
    )Balance, March 31, 2009
    
    
    13,589,970
    
    
    $
    13,589
    
    
    $
    59,752,468
    
    
    $
    (57,795,011
    )
    
    $
    (911,516
    )
    
    $
    1,059,530
   6




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THREE MONTHS ENDED MARCH 31,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (561,642
    )
    
    $
    (615,885
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation expense
    
    
    15,503
    
    
    
    18,740Amortization of patents
    
    
    18,281
    
    
    
    10,943Amortization of debt discount
    
    
    7,875
    
    
    
    6,129Common stock and options issued for compensation, consulting
and vendor services
    
    
    220,992
    
    
    
    638,960Changes in operating assets and liabilities:(Increase) Decrease in accounts receivable
    
    
    (172,787
    )
    
    
    1,999Decrease in royalty receivable
    
    
    
    
    
    
    1,195Decrease in inventories
    
    
    72,226
    
    
    
    298,172Decrease (Increase) to advances to contract manufacturer
    
    
    125,160
    
    
    
    (967
    )Increase to prepaid expenses and other current assets
    
    
    (10,920
    )
    
    
    (34,990
    )Decrease in other assets
    
    
    
    
    
    
    2,746Increase (Decrease) in accounts payable (short & long term)
    
    
    248,622
    
    
    
    (833,380
    )(Decrease) Increase in accrued expenses
    
    
    (163,567
    )
    
    
    84,197Increase in deferred compensation
    
    
    
    
    
    
    14,543Net cash used in operating activities
    
    
    (200,257
    )
    
    
    (407,598
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (30,131
    )
    
    
    (2,931
    )Payment for patents rights
    
    
    (12,609
    )
    
    
    (96,758
    )Net cash used in investing activities
    
    
    (42,740
    )
    
    
    (99,689
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (242,997
    )
    
    
    (507,287
    )Cash and cash equivalents at beginning of period
    
    
    743,665
    
    
    
    745,003Cash and cash equivalents at end of period
    
    $
    500,668
    
    
    $
    237,716Supplemental disclosure of cash flow information:Income taxes paid
    
    $
    3,597
    
    
    $
    3,140Stocks issued to employees in lieu of cash compensation
    
    $
    125,324
    
    
    $
    15,832Shares issued to settle accounts payable
    
    $
    42,000
    
    
    $
    488,847
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MILESTONE SCIENTIFIC INC.
 
 NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
         8




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NOTE 1  SUMMARY OF ACCOUNTING POLICIES
 Cash and Cash Equivalents
  Inventories
  Patents
  Revenue Recognition
   Use of Estimates
 .
 Recent Accounting Pronouncements
    9




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Summary No. 141 (revised 2007)
 Non-controlling Interest in Consolidated Financial Statements- and amendment of ARB No. 51.
    Reclassifications
  NOTE  2 BASIC AND DILUTED NET LOSS PER COMMON SHARE
    10




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NOTE  3 STOCK OPTION PLANS
 Share-Based Payment
  WeightedWeighted
    
    
    Average
    
    
    AggregateNumber
    
    
    Averaged
    
    
    Remaining
    
    
    Intrinsicof
    
    
    Exercise
    
    
    Contractual
    
    
    OptionsOptions
    
    
    Price
    
    
    Life (Years)
    
    
    ValueOutstanding, January 1, 2009
    
    
    570,832
    
    
    $
    1.51
    
    
    
    3.01
    
    
    $
    75Granted
    
    
    303,056
    
    
    
    0.43
    
    
    
    4.93
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (235,556
    )
    
    
    0.64
    
    
    
    
    
    
    
    Outstanding, March 31, 2009
    
    
    638,332
    
    
    
    1.32
    
    
    
    3.12
    
    
    
    2,042Exercisable, March 31, 2009
    
    
    377,470
    
    
    
    1.81
    
    
    
    2.24
    
    
    
    555
     11




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##### Table of Contents



WeightedWeighted
    
    
    Average
    
    
    AggregateNumber
    
    
    Averaged
    
    
    Remaining
    
    
    Intrinsicof
    
    
    Exercise
    
    
    Contractual
    
    
    OptionsOptions
    
    
    Price
    
    
    Life (Years)
    
    
    ValueOutstanding, January 1, 2009
    
    
    627,467
    
    
    
    3.14
    
    
    
    1.61
    
    
    
    Granted
    
    
    35,000
    
    
    
    0.40
    
    
    
    5.00
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (101,133
    )
    
    
    3.49
    
    
    
    
    
    
    
    Outstanding, March 31, 2009
    
    
    561,334
    
    
    
    2.91
    
    
    
    1.85
    
    
    
    Exercisable, March 31, 2009
    
    
    498,834
    
    
    
    3.05
    
    
    
    1.72
    
    
    
    
    NOTE  4 CONCENTRATION OF CREDIT RISK
 CompuDent
   12




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NOTE  5 LINE OF CREDIT AND NOTE PAYABLE
   NOTE  6 STOCK ISSUANCE
  NOTE  7 SIGNIFICANT CUSTOMERS
   Three Months Ended March 31,2009
    
    
    2008Instruments
    
    $
    791,952
    
    
    $
    219,205Handpieces
    
    
    1,395,212
    
    
    
    1,151,226Other
    
    
    17,655
    
    
    
    17,559$
    2,204,819
    
    
    $
    1,387,990United States
    
    $
    1,478,495
    
    
    $
    897,715Canada
    
    
    141,279
    
    
    
    160,322Other Foreign
    
    
    585,045
    
    
    
    329,953$
    2,204,819
    
    
    $
    1,387,990
  13




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##### Table of Contents



STA CompuDent STA CompuDent
 STA CompuDent CompuMed
 NOTE  8 COMMITMENTS AND OTHER
 Contract Manufacturing Arrangement
 CompuDent, STA CompuMed The Wand The Wand
   14




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis and Plan of Operation.
  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 Deliver (C-CLAD) solution,
the STA Single Tooth Anesthesia System(STA System); and
 
    
    Identifying and pursing strategic collaborations with third parties to jointly
develop new products utilizing our patented CompuFlo pressure force technology for novel
new medical applications.
 STA System Awards  Industry Recognition
 STA System Dentistry Today STA System STA System Medical Device & Diagnostic Industry STA
System STA System
 STA System Dentaltown Magazine CompuDent/The Wand. Dental Products Report DPR DPR DPRs STA System
 Second Annual Symposium on C-CLAD
 STA
System STA System
  15




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##### Table of Contents



nd
 
    
    The History of C-CLAD
 
    
    Treating with Connection
 
    
    Heart Rate Study
 
    
    STACompassionate Care in the 21st Century
 
    
    Injection Advances and Challenges
 
    
    Physiologic and Clinical Characteristics of PDL Anesthesia Delivered by a High
Pressure Syringe 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 Dental Economics STA System
 Global Distribution Network
 STA System STA System
 STA System
  STA System
  16




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Segmented Sales Performance
  Three Months Ended March 31,2009
    
    
    2008DOMESTICInstruments
    
    $
    526,413
    
    
    
    35.6
    %
    
    $
    81,144
    
    
    
    9.0
    %Handpieces
    
    
    931,810
    
    
    
    63.0
    %
    
    
    799,744
    
    
    
    89.1
    %Other
    
    
    20,272
    
    
    
    1.4
    %
    
    
    16,827
    
    
    
    1.9
    %Total Domestic
    
    $
    1,478,495
    
    
    
    100.0
    %
    
    $
    897,715
    
    
    
    100.0
    %INTERNATIONALInstruments
    
    $
    265,539
    
    
    
    36.6
    %
    
    $
    138,061
    
    
    
    28.2
    %Handpieces
    
    
    463,402
    
    
    
    63.8
    %
    
    
    351,482
    
    
    
    71.7
    %Other
    
    
    (2,617
    )
    
    
    -0.4
    %
    
    
    732
    
    
    
    0.1
    %Total International
    
    $
    726,324
    
    
    
    100.0
    %
    
    $
    490,275
    
    
    
    100.0
    %DOMESTIC/INTERNATIONAL ANALYSISDomestic
    
    $
    1,478,495
    
    
    
    67.1
    %
    
    $
    897,715
    
    
    
    64.7
    %International
    
    
    726,324
    
    
    
    32.9
    %
    
    
    490,275
    
    
    
    35.3
    %Total Product Sales
    
    $
    2,204,819
    
    
    
    100.0
    %
    
    $
    1,387,990
    
    
    
    100.0
    %
  New Product Development and Commercialization
  Executive Management Change
  Technology Rights
 SafetyWand CompuFlo CompuDent CompuDent STA
  17




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Summary of Significant Accounting Policies, Judgments and Estimates
  Accounts Receivable
  Inventories
  Impairment of Long-Lived Assets
  Revenue Recognition
  Results of Operations
 STA System CompuFlo
  18




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##### Table of Contents



Three Months Ended March 312009
    
    
    2008Products sales, net
    
    $
    2,204,819
    
    
    
    100
    %
    
    $
    1,387,990
    
    
    
    99
    %Royalty income
    
    
    
    
    
    
    0
    %
    
    
    14,163
    
    
    
    1
    %Total revenue
    
    
    2,204,819
    
    
    
    100
    %
    
    
    1,402,153
    
    
    
    100
    %Cost of products sold
    
    
    916,550
    
    
    
    42
    %
    
    
    463,924
    
    
    
    33
    %Gross Profit
    
    
    1,288,269
    
    
    
    58
    %
    
    
    938,229
    
    
    
    67
    %Selling, general and
administrative expenses
    
    
    1,728,815
    
    
    
    78
    %
    
    
    1,471,978
    
    
    
    105
    %Research and development expenses
    
    
    67,622
    
    
    
    3
    %
    
    
    48,319
    
    
    
    3
    %Total operating expenses
    
    
    1,796,437
    
    
    
    81
    %
    
    
    1,520,297
    
    
    
    108
    %Loss from operations
    
    
    (508,168
    )
    
    
    -23
    %
    
    
    (582,068
    )
    
    
    -42
    %Other income  interest & expense
    
    
    (53,474
    )
    
    
    -2
    %
    
    
    (33,817
    )
    
    
    -2
    %Net loss
    
    $
    (561,642
    )
    
    
    -25
    %
    
    
    (615,885
    )
    
    
    -44
    %
 Three months ended March 31, 2009 compared to three months ended March 31, 2008
 STA STA STA System STA CompuDent
   STA Systems STA System
   19




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Liquidity and Capital Resources
       
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
   20




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Item 4. Controls and Procedures
    21




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 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
    
    
    253,342
    
    
    $
    125,324Shares issued for services
    
    
    74,634
    
    
    
    42,000327,976
    
    
    $
    167,324
   
 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.
  23




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SIGNATURES
  MILESTONE SCIENTIFIC INC./s/ Leonard OsserLeonard OsserInterim Chief Executive Officer/s/ Joseph DAgostinoJoseph DAgostinoChief Financial Officer   24




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##### 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
    
    
    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.
  25