Prepared and filed by St Ives Burrups
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-QSB
 
Mark One
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the Quarterly Period Ended September 30, 2005
 
 
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.
(Exact name of Registrant as specified in its charter)
 
Delaware
 
13-3545623
 
State or other jurisdiction
or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
220 South Orange Avenue, Livingston, New Jersey 07039
(Address of principal executive office) (Zip Code)
 
 
 
(973) 535-2717
(Registrant’s telephone number, including area code)
 
 
 
          Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) or the Securities Exchange Act of 1934 during the preceding 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      No  
 
As of November 14, 2005, the Registrant had a total of 11,510,072 shares of Common Stock, $.001 par value, outstanding.
 
 
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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’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
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MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES
 
I N D E X
 
 
 
 
PAGE
 
 
 
PART I
FINANCIAL INFORMATION
 
 
 
 
 
ITEM 1
Condensed Consolidated Financial Statements (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CERTIFICATIONS
25
 
3
 
MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
September 30,
2005
 
December 31,
2004 *
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
3,651,943
 
$
3,041,306
 
Accounts receivable, net of allowance for doubtful accounts of $31,720 in 2005 and
$24,903 in 2004
 
 
633,035
 
 
421,339
 
Royalty receivable
 
 
252,842
 
 
—
 
Inventories
 
 
1,309,940
 
 
936,221
 
Advances to contract manufacturer
 
 
320,216
 
 
62,034
 
Prepaid expenses
 
 
102,755
 
 
104,562
 
 
 
 
 
Total current assets
 
 
6,270,731
 
 
4,565,462
 
Investment in distributor, at cost
 
 
76,319
 
 
69,956
 
Equipment, net
 
 
559,358
 
 
612,263
 
Patents, net
 
 
419,709
 
 
101,242
 
Other assets
 
 
26,711
 
 
20,408
 
 
 
 
 
Totals
 
$
7,352,828
 
$
5,369,331
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
Accounts payable
 
$
550,741
 
$
474,075
 
Accrued expenses
 
 
256,185
 
 
224,549
 
 
 
 
 
Total current liabilities
 
 
806,926
 
 
698,624
 
Deferred compensation payable to officer
 
 
262,500
 
 
150,000
 
 
 
 
 
Total liabilities
 
 
1,069,426
 
 
848,624
 
 
 
 
 
Stockholders’ Equity:
 
 
 
 
 
 
 
Preferred stock, par value $.001; authorized 5,000,000 shares 8% cumulative convertible preferred stock, par value $.001; authorized, issued and outstanding, 25,365 shares
 
 
25
 
 
25
 
Common stock, par value $.001; authorized 50,000,000 shares; 11,466,024 shares issued
and 11,432,691 shares outstanding in 2005, and 9,824,287 shares issued and
9,790,954 shares outstanding in 2004
 
 
11,466
 
 
9,824
 
Additional paid-in capital
 
 
56,661,074
 
 
52,618,913
 
Accumulated deficit
 
 
(49,477,647
)
 
(47,196,539
)
Treasury stock, at cost, 33,333 shares
 
 
(911,516
)
 
(911,516
)
 
 
 
 
Total stockholders’ equity (deficiency)
 
 
6,283,402
 
 
4,520,707
 
 
 
 
 
Totals
 
$
7,352,828
 
$
5,369,331
 
 
 
 
 
 
See notes to Condensed Consolidated Financial Statements
 
*Derived from the audited financial statements as of December 31, 2004.
 
4
 
MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(Unaudited)
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
 
 
 
September 30,
2005
 
September 30,
2004
 
September 30,
2005
 
September 30,
2004
 
 
 
 
 
 
 
Products sales, net
 
$
1,567,382
 
$
1,110,043
 
$
4,482,016
 
$
3,392,288
 
Royalty income
 
 
252,842
 
 
—
 
 
472,052
 
 
—
 
 
 
 
 
 
 
Total revenue
 
 
1,820,224
 
 
1,110,043
 
 
4,954,068
 
 
3,392,288
 
 
 
 
 
 
 
                           
Cost of products sold
 
 
643,426
 
 
563,730
 
 
1,896,736
 
 
1,879,414
 
Royalty expense
 
 
30,341
 
 
—
 
 
56,646
 
 
—
 
 
 
 
 
 
 
Total cost of revenue
 
 
673,767
 
 
563,730
 
 
1,953,382
 
 
1,879,414
 
 
 
 
 
 
 
                           
Gross profit
 
 
1,146,457
 
 
546,313
 
 
3,000,686
 
 
1,512,874
 
                           
Selling, general and administrative expenses
 
 
1,738,286
 
 
1,608,176
 
 
5,194,541
 
 
3,804,961
 
Research and development expenses
 
 
53,678
 
 
41,679
 
 
155,067
 
 
135,300
 
 
 
 
 
 
 
 
 
 
1,791,964
 
 
1,649,855
 
 
5,349,608
 
 
3,940,261
 
 
 
 
 
 
 
                           
Loss from operations
 
 
(645,507
)
 
(1,103,542
)
 
(2,348,922
)
 
(2,427,387
)
                           
Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
 
33,132
 
 
23,942
 
 
67,814
 
 
64,952
 
Interest expense
 
 
—
 
 
(3,576
)
 
—
 
 
(67,213
)
 
 
 
 
 
 
Other income (expense) net
 
 
33,132
 
 
20,366
 
 
67,814
 
 
(2,261
)
 
 
 
 
 
 
Net Loss
 
 
(612,375
)
 
(1,083,176
)
 
(2,281,108
)
 
(2,429,648
)
                           
Dividends applicable to preferred stock
 
 
(507
)
 
(1,544
)
 
(1,522
)
 
(1,544
)
 
 
 
 
 
 
Net loss applicable to common stockholders
 
$
(612,882
)
$
(1,084,720
)
$
(2,282,630
)
$
(2,431,192
)
 
 
 
 
 
 
Loss per share applicable to common stockholders - basic and diluted
 
$
(0.05
)
 
(0.11
)
$
(0.21
)
 
(0.27
)
 
 
 
 
 
 
Weighted average shares outstanding - basic and diluted
 
 
11,366,617
 
 
9,667,381
 
 
10,738,396
 
 
8,952,598
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements
 
5
 
MILESTONE SCIENTIFIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
NINE MONTHS ENDED SEPTEMBER 30, 2005
(Unaudited)
 
 
 
Preferred Stock
 
Common Stock
 
Additional
Paid-in Capital
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Deficit
 
Treasury Stock
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2005
 
 
25,365
 
$
25
 
 
9,824,287
 
$
9,824
 
$
52,618,913
 
$
(47,196,539
)
$
(911,516
)
$
4,520,707
 
Common stock and options issued for payments of patent rights acquired
 
 
 
 
 
 
 
 
43,424
 
 
44
 
 
87,289
 
 
 
 
 
 
 
 
87,333
 
Common stock issued for payment of vendor services
 
 
 
 
 
 
 
 
78,717
 
 
79
 
 
176,296
 
 
 
 
 
 
 
 
176,375
 
Common stock and options issued for payment of consulting services
 
 
 
 
 
 
 
 
139,362
 
 
140
 
 
211,917
 
 
 
 
 
 
 
 
212,057
 
Common stock issued for payment of employee compensation
 
 
 
 
 
 
 
 
23,461
 
 
23
 
 
39,978
 
 
 
 
 
 
 
 
40,001
 
Common stock issued for exercised option
 
 
 
 
 
 
 
 
333
 
 
0
 
 
749
 
 
 
 
 
 
 
 
749
 
Proceeds from equity financings, net
 
 
 
 
 
 
 
 
1,356,440
 
 
1,356
 
 
3,525,932
 
 
 
 
 
 
 
 
3,527,288
 
Net loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,281,108
)
 
 
 
 
(2,281,108
)
 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2005
 
 
25,365
 
$
25
 
 
11,466,024
 
$
11,466
 
$
56,661,074
 
$
(49,477,647
)
$
(911,516
)
$
6,283,402
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements
 
6
 
MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(Unaudited)
 
 
 
2005
 
2004
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
 
 
Net loss
 
$
(2,281,108
)
$
(2,429,648
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
Depreciation
 
 
74,457
 
 
28,481
 
Amortization of debt discount and deferred financing costs
 
 
—
 
 
49,119
 
Amortization of patents
 
 
13,468
 
 
—
 
Common stock and options issued for compensation and consulting services
 
 
428,433
 
 
1,548
 
Bad debt expense
 
 
6,817
 
 
—
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
(Increase) in accounts receivable
 
 
(218,513
)
 
(93,881
)
(Increase) in royalty receivable
 
 
(252,842
)
 
—
 
(Increase) in inventories
 
 
(373,719
)
 
(341,982
)
(Increase) decrease in advances to contract manufacturer
 
 
(258,182
)
 
227,630
 
Decrease in prepaid expenses
 
 
1,807
 
 
7,202
 
(Increase) decrease in other assets
 
 
(6,303
)
 
5,364
 
Increase (decrease) in accounts payable
 
 
76,666
 
 
(675,643
)
(Decrease) in accrued interest
 
 
—
 
 
(81,265
)
Increase in accrued expenses
 
 
31,636
 
 
250,199
 
Increase (decrease) in deferred compensation
 
 
112,500
 
 
(143,500
)
 
 
 
 
Net cash used in operating activities
 
 
(2,644,883
)
 
(3,196,376
)
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
Payment for capital expenditures
 
 
(21,552
)
 
(354,888
)
Payment for patent rights
 
 
(244,602
)
 
—
 
Payment for investment in distributor
 
 
(6,363
)
 
—
 
 
 
 
 
Net cash used in investing activities:
 
 
(272,517
)
 
(354,888
)
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
Proceeds from equity financings, net
 
 
3,527,288
 
 
7,620,104
 
Proceeds from exercise of option
 
 
749
 
 
 
 
Payments of note payable - officer/stockholder
 
 
—
 
 
(50,000
)
 
 
 
 
Net cash provided by financing activities
 
 
3,528,037
 
 
7,570,104
 
 
 
 
 
NET INCREASE IN CASH AND CASH EQUIVALENTS
 
 
610,637
 
 
4,018,840
 
Cash and cash equivalents beginning of period
 
 
3,041,306
 
 
3,277
 
 
 
 
 
Cash and cash equivalents end of period
 
$
3,651,943
 
$
4,022,117
 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
Cash paid during the period for interest
 
$
—
 
$
99,359
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements
 
7
 
MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(Unaudited)
 
Supplemental schedule of non-cash investing and financing activities:
 
          Pursuant to a technology agreement to provide Milestone with patent rights, in the first quarter of 2005, Milestone issued 43,424 shares valued at $70,000 to the Company’s outside director of clinical affairs.
 
          In the first quarter of 2005, Milestone issued a total of 29,043 shares valued at $72,000 (of which $53,666 was expensed in the nine months ended September 30, 2005) to five consultants in satisfaction of various consulting agreements.
 
          In the first quarter of 2005, we issued a total of 16,026 shares valued at $33,333 to a former employee as part of a severance agreement and a current employee as bonus.
 
          In the three months ended March 31, 2005, Milestone issued 38,730 shares to a vendor in satisfaction of $100,000 of payables owed in connection with warehousing and fulfillment services rendered.
 
          On April 4, 2005, Milestone completed a $2,999,996 private placement of 101,044 units to accredited investors. Each unit consists of 10 shares of common stock and two warrants.  Proceeds from the private placements were recorded net of a 7% placement agent fee of $209,978 and other offering expenses totaling $59,784.
 
          On June 27, 2005 Milestone issued 7,435 shares valued at $20,000 to an employee as part of annual compensation (of which $6,668 was expensed in the nine-month period ended September 30, 2005).In the second quarter of 2005, Milestone issued a total of 70,319 shares valued at $200,000 to two consultants (of which $90,929 was expensed in the nine months ended September 30, 2005) for professional service rendered in April and for advertising and marketing services to be rendered in a twelve-month period ending March 30, 2006.
 
          On June 16, 2005 Milestone issued 8,333 options valued at $17,333 to the Company’s outside director of clinical affairs in consideration of newly granted patent rights.
 
          On June 30, 2005, Milestone completed an $847,960 private placement of 34,000 units to accredited investors. Each unit consists of 10 shares of common stock and two warrants.  Proceeds from this private placement were recorded net of a fee of $50,878 and 600 identical units to the investment adviser. Dynamic Decisions acted as investment adviser to Milestone in this transaction and received a fee of $50,878 and 600 Units, which are substantially the same form as those issued to the investors.  Total proceeds from this private placement, after commissions and other expenses, were $797,054.
 
          On August 31, 2005 we issued 40,000 shares valued at $100,000 (of which $4,167 was expensed in the nine months ended September 30, 2005) to a marketing and sales consultant to aid in the international sale and distribution of CoolBlue™ Wand dental enhancement system.
 
          In the third quarter of 2005, Milestone issued a total of 39,987 shares to two vendors in satisfaction of $76,375 of payables owed in connection with exhibition facilities and warehousing services rendered.
 
          Operations for the nine months ended September 30, 2005 include an expense of $63,295 for amortization of options issued in 2002 and 2004.
 
8
 
          In February 2004, Milestone issued 335,614 units in consideration for notes payable and accrued interest due to an officer and a shareholder of $1,604,204, accounts payable due to outside legal counsel of $200,000 and deferred compensation to an officer of $384,000. Each unit consisted of 2 shares of Milestone’s common stock (671,228 shares of common stock) and a warrant.
 
          As part of its payment for services in connection with the February 2004 public offering, Milestone issued to its outside general counsel 5-year options to purchase 160,000 shares of common stock at an exercise price of $3.26 per share and warrants to purchase 80,000 shares of common stock at an exercise price of $4.89.
 
          In April 2004, pursuant to an agreement to purchase media placement services, the Company issued 1,106 shares of common stock valued at $2,500.
 
          In May 2004, the Company issued 1,133 options for consulting services valued at $1,548 which was recognized as expense during the period.
 
          In September 2004, in consideration for payment of $70,411 of accounts payable, the Company issued 36,331 shares of common stock to L. C. Mold Inc.
 
9
 
 
MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Note 1 - Summary of accounting policies:
 
 
 
The unaudited condensed consolidated financial statements of Milestone Scientific Inc. and Subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
 
 
 
These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2004 included in Milestone’s Annual Report on Form 10-KSB. The accounting policies used in preparing these unaudited condensed consolidated financial statements are the same as those described in the December 31, 2004 consolidated financial statements.
 
 
 
In the opinion of Milestone, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring entries) necessary to present fairly Milestone’s financial position as of September 30, 2005 and the results of its operations for the three and nine months ended September 30, 2005 and 2004.
 
 
 
The results reported for the three and nine months ended September 30, 2005 are not necessarily indicative of the results of operations which may be expected for a full year.
 
 
Note 2 – Private Placements
 
 
 
On April 4, 2005 Milestone completed a $2,999,996 private placement of 101,044 Units to accredited investors. Each Unit consisted of 10 shares of Common Stock and two Warrants.  Each Warrant entitles the holder to purchase a share of Common Stock at $4.89 per share through the close of business on February 16, 2009.  I-Bankers Securities, Inc. acted as placement agent for Milestone in this transaction and received a fee of $209,978 and 101,044 Warrants identical in terms to those issued to the investors. Total proceeds to Milestone after commissions and other expenses were $2,730,234.
 
 
 
On June 30, 2005 Milestone completed an $847,960 private placement of 34,000 Units to accredited investors. Each Unit consists of 10 shares of Common Stock and two Warrants.  Each Warrant entitles the holder to purchase a share of Common Stock at $4.89 per share through the close of business on February 16, 2009.  Dynamic Decisions acted as investment adviser to Milestone in this transaction and received a fee of $50,878 and 600 Units, which are substantially the same form as those issued to the investors.  Total proceeds from this private placement, after commissions and other expenses, were $797,054.
 
 
Note 3  - Royalty Receivable:
 
 
 
Royalty receivable represents the royalty due from United Systems, Inc, the licensee of Milestone’s proprietary consumer dental whitening product, which is sold under Milestone’s distributor’s trademark, Ionic White™.  The royalty receivable of $252,842 was collected on November 7, 2005.
 
 
Note 4 - Inventories:
 
 
 
Inventories principally consist of finished goods and component parts stated at the lower of cost (first-in, first-out method) or market.
 
10
 
Note 5 - Basic and diluted net loss per common share:
 
 
 
Milestone presents basic earnings (loss) per common share and, if applicable, diluted earnings per common share pursuant to the provisions of Statement of Financial Accounting Standards No. 128, “Earnings per Share” (“SFAS 128”).  Basic earnings (loss) per common shares is calculated by dividing net income or loss applicable to common stock by the weighted average number of common shares outstanding during each period. The calculation of diluted earnings per common share is similar to that of basic earnings per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of stock options, warrants, and the conversion of notes payable were issued during the period. Milestone has not included the common shares issuable upon conversion of the outstanding 25,365 preferred shares in the weighted average number of shares outstanding in the computation of basic loss per share because their effect would have been anti-dilutive. This treatment is in accordance with the “two class” method of computing earnings (loss) per share set forth in SFAS 128.
 
 
 
Since Milestone had net losses for the three and nine months ended September 30, 2005 and 2004, the assumed effects of the exercise of 3,517,809 and 3,249,692 outstanding stock options and warrants, and the conversion of preferred stock into common stock at September 30, 2005 and 2004, were not included as their effect would have been anti-dilutive.
 
 
Note 6 – Significant Customer:
 
 
 
Milestone had one foreign customer who accounted for approximately 12% and 14% of its net sales (excluding royalty income) for the three and nine months ended September 30, 2005, respectively and approximately 24% and 22% for the three and nine months ended September 30, 2004, respectively.  At September 30, 2005, receivables from this customer were approximately 64% of Milestone’s total accounts receivable.
 
 
Note 7 – Employee Stock Option Plan
 
 
 
As of September 30, 2005, there were 261,167 outstanding options granted under the Milestone 1997 Stock Option Plan and no option grants had been made under the Milestone 2004 Stock Option Plan. Milestone accounts for these plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations.  No stock-based employee compensation cost is reflected in net loss, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the dates of grant.  The following table illustrates net loss and net loss per share if Milestone had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
 
11
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
 
 
 
 
 
2005
 
2004
 
2005
 
2004
 
 
 
 
 
 
 
Net loss applicable to common stockholders, as reported
 
$
(612,882
)
$
(1,084,720
)
$
(2,282,630
)
$
(2,431,192
)
Deduct total stock-based employee compensation expenses determined under the fair value based method for all awards
 
 
615
 
 
12,687
 
 
228,803
 
 
38,060
 
 
 
 
 
 
 
Net loss applicable to common stockholders, pro forma
 
$
(613,497
)
$
(1,097,407
)
$
(2,511,433
)
$
(2,469,252
)
 
 
 
 
 
 
Loss per share applicable to common stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported
 
$
(0.05
)
$
(0.11
)
$
(0.21
)
$
(0.27
)
 
 
 
 
 
 
Pro forma
 
$
(0.05
)
$
(0.11
)
$
(0.23
)
$
(0.28
)
 
 
 
 
 
 
 
 
The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions used for the grants in the quarters ended September 30, 2005 and 2004, respectively: dividend yield of 0%; expected volatility of 149.29% and 90%; risk free interest rate of 4.02% and 2.5%; and expected lives of 8 years and 3 years.
 
 
 
During the nine months ended September 30, 2005, Milestone issued 80,000 stock options to employees at an exercise price of $3.27.
 
 
Note 8 – Agreements to Issue Common Stock and Stock Option
 
 
 
          On May 18, 2005, Milestone issued to Ionic White, Inc., its marketing partner for a consumer tooth whitening product, 3-year options to purchase 100,000 shares of Milestone common stock at $4.89 per share.  The options are not exercisable unless the marketing partner purchases at least 2,000,000 starter kits for the registrant’s consumer tooth whitening system during the twelve month period beginning July 1, 2005.  If 2,000,000 starter kits are purchased during that period, options to purchase 10,000 shares become exercisable.  If 2,500,000 starter kits are purchased during that period, options to purchase an aggregate of 50,000 shares become exercisable.  If 3,000,000 starter kits are purchased during that period, options to purchase all 100,000 shares become exercisable.
 
 
 
          Under a previous agreement, Ionic White, Inc., agreed to purchase 500,000 shares of Milestone common stock in quarterly installments of 125,000 shares within 10 days after the end of each of the four fiscal quarters commencing July 1, 2005.  Milestone is not required to sell these shares unless Ionic White has purchased at least 625,000 starter kits in the first quarter, at least 1,250,000 starter kits in the first two quarters and at least 1,875,000 starter kits in the first three quarters.  Further, at Milestone’s option, all shares previously purchased must be returned to Milestone and all monies paid to Milestone returned to Ionic White if it has not purchased an aggregate of at least 3,000,000 starter kits for the twelve-month period ending June 30, 2006. 
 
 
 
          On September 30, 2005 this agreement was amended to defer for an additional quarter the commencement date for Ionic White’s commitment to purchase stock. 
 
 
 
          On August 12, 2005 Milestone engaged a special marketing and sales consultant to aid in the international sale and distribution of CoolBlue™ Wand dental enhancement system, particularly in its applications for professional tooth whitening.  As part of the compensation for a two-year consulting service, Milestone issued 40,000 shares of common stock valued at $100,000 to the consultant. 
 
12
 
 
          In addition, if as a result of the consultant’s efforts, Milestone is able to establish distribution relationships, on terms and conditions satisfactory to Milestone, with one of the four top world-wide distributors of dental products, or other major distributors as are acceptable to Milestone, and Milestone sells such distributors $3,000,000 of product within 18 months commencing August 12, 2005, Milestone will pay the consultant a $20,000 bonus, in shares of Milestone common stock, valued based on the then current market value.  Furthermore, at Milestone’s option, all shares of common stock issued to the consultant must be returned to Milestone if the consultant has not arranged a meeting with a major distributor within a specified period.
 
13
 
ITEM 2.  Management’s Discussion and Analysis or Plan of Operation.
 
OVERVIEW
 
          You should read the following discussions of our financial condition and results of operations in conjunction with the financial statements and the notes to those statements included elsewhere in this Form 10-QSB. This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth in our Form 10K-SB for the year ended December 31, 2004.
 
          Milestone has succeeded in improving its liquidity by acquiring the capital necessary to grow our business and seize the market opportunity that our proprietary products have created. During 2004 and continuing through the first three quarters of 2005, we have grown our revenue base both with our existing product line and the introduction of new products. 
 
          Most of our revenues continue to be generated through sales of our CompuDent system and The Wand disposable handpiece used with that system. Revenues have been earned domestically and internationally through sales in more than 25 countries.  While worldwide revenues are growing, domestic CompuDent and handpiece sales have provided an increasingly large portion of our revenues. This is an important metric as it validates the investment made in our domestic sales distribution organization. Additionally, we enjoy significantly higher margins on domestic sales compared to the lower per unit and handpiece margins we receive from our wholesale based international distribution network. We anticipate that this growing base of new customers will generate increased future sales of our disposable handpiece products. We also believe that our ownership of the SafetyWand technology in light of OSHA regulations issued pursuant to recent federal and state government legislation mandating needle stick safety standards positions us to become a leading provider for dentists and other health care professionals in the administration of local anesthesia, thereby providing further revenue growth opportunities.
 
          In late March we launched, through widely broadcast infomercials, our consumer tooth whitening product sold under our distributor’s trademark, Ionic White™.  Our consumer tooth whitening product and the CoolBlue™ Professional Tooth Whitening System, complement our existing product line.  The tooth whitening market is a fast growing dental segment and we believe that it will provide significant additional revenue opportunities. Revenues for the second and third quarters reflect sales of Ionic White™. During the second quarter a competitor launched a confusingly similar tooth whitening product through infomercials and retail distribution.  In April 2004, Milestone commenced an infringement of trade dress action and the defendant has counterclaimed against Milestone for a declaratory judgment of non-infringement.  The introduction of this competitive product has caused our distributor to focus its near-term marketing efforts on retail sales.  Subsequent to the end of the quarter, the defendant brought an action against us and our distributor to enjoin alleged false advertising claims.  On October 31, 2005, we entered into a non-monetary Stipulation and Order which: a) dismissed with prejudice our infringement of trade dress claims, and b) dismissed with prejudice the false advertising claims filed by the competitor against us and others involving the Ionic White tooth-whitening product, and the distributor of the Ionic White product agreed to remove certain claims from the packaging of the product.
 
          Selling, general and administrative expenses for the third quarter increased from last year, reflecting our continuing enhancement of our domestic dental sales capability and increased marketing and promotional efforts, including trade show appearances, for our dental products. In August, we launched a consumer focused marketing campaign through radio advertising in a test market. The increase also reflects our continuing efforts to complete development of, and find marketing partners for, medical devices using our advanced technology, particularly our CompuFlo™ syringe pump technology. 
 
14
 
          The following table shows a breakdown of our product sales in each product category, domestically and internationally, and the percentage of sales to total product sales:
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
 
 
 
September 30, 2005
 
September 30, 2004
 
September 30, 2005
 
September 30, 2004
 
 
 
 
 
 
 
DOMESTIC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CompuDent
 
$
365,306
 
 
31.6%
$
155,959
 
 
20.1%
$
1,070,070
 
 
32.6%
$
431,712
 
 
18.6%
Handpieces
 
 
749,800
 
 
65.0%
 
587,840
 
 
75.5%
 
2,053,295
 
 
62.5%
 
1,744,609
 
 
75.3%
Other
 
 
39,624
 
 
3.4%
 
34,016
 
 
4.4%
 
162,433
 
 
4.9%
 
140,494
 
 
6.1%
 
 
 
 
 
 
 
 
 
 
Total Domestic
 
$
1,154,730
 
 
100.0%
$
777,815
 
 
100.0%
$
3,285,798
 
 
100.0%
$
2,316,815
 
 
100.0%
 
 
 
 
 
 
 
 
 
 
INTERNATIONAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CompuDent
 
$
100,103
 
 
24.3%
$
202,029
 
 
60.8%
$
392,311
 
 
32.8%
$
527,278
 
 
49.0%
Handpieces
 
 
273,353
 
 
66.2%
 
116,177
 
 
35.0%
 
706,519
 
 
59.1%
 
508,823
 
 
47.3%
Other
 
 
39,196
 
 
9.5%
 
14,022
 
 
4.2%
 
97,388
 
 
8.1%
 
39,372
 
 
3.7%
 
 
 
 
 
 
 
 
 
 
Total International
 
$
412,652
 
 
100.0%
$
332,228
 
 
100.0%
$
1,196,218
 
 
100.0%
$
1,075,473
 
 
100.0%
 
 
 
 
 
 
 
 
 
 
DOMESTIC/INTERNATIONAL ANALYSIS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
$
1,154,730
 
 
73.7%
$
777,815
 
 
70.1%
$
3,285,798
 
 
73.3%
$
2,316,815
 
 
68.3%
International
 
 
412,652
 
 
26.3%
 
332,228
 
 
29.9%
 
1,196,218
 
 
26.7%
 
1,075,473
 
 
31.7%
 
 
 
 
 
 
 
 
 
 
Total Product Sales
 
$
1,567,382
 
 
100.0%
$
1,110,043
 
 
100.0%
$
4,482,016
 
 
100.0%
$
3,392,288
 
 
100.0%
 
 
 
 
 
 
 
 
 
 
 
15
 
Summary of Significant Accounting Policies
 
 
 
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, we evaluate our estimates, including those related to accounts receivable, inventories, stock based compensation and contingencies.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from those estimates under different assumptions or conditions.
 
 
Inventory
 
 
 
Inventories principally consist of finished goods and component parts stated at the lower of cost (first-in, first-out method) or market.
 
 
Impairment of Long-Lived Assets
 
 
 
We review long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered.
 
 
Revenue Recognition
 
 
 
Revenue is recognized when title passes at the time of shipment and collectibility based on a sales arrangement and the agreed upon price is reasonably assured.
 
Results of Operations
 
              The consolidated results of operations for the nine months ended September 30, 2005 reflect growth of our user base and the initial additional expenditures necessary to further expand our customer base both domestically and abroad.
 
The following table sets forth, for the periods presented, statement of operations data as a percentage of revenues.  The trends suggested by this table may not be indicative of future operating results.
 
16
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
 
 
 
September 30, 2005
 
September 30, 2004
 
September 30, 2005
 
September 30, 2004
 
 
 
 
 
 
 
Products sales, net
 
$
1,567,382
 
 
86%
$
1,110,043
 
 
100%
$
4,482,016
 
 
90%
$
3,392,288
 
 
100%
Royalty income
 
 
252,842
 
 
14%
 
—
 
 
0%
 
472,052
 
 
10%
 
—
 
 
—
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
1,820,224
 
 
100%
 
1,110,043
 
 
100%
 
4,954,068
 
 
100%
 
3,392,288
 
 
100%
 
 
 
 
 
 
 
 
 
 
Cost of products sold
 
 
643,426
 
 
35%
 
563,730
 
 
51%
 
1,896,736
 
 
38%
 
1,879,414
 
 
55%
Royalty expense
 
 
30,341
 
 
2%
 
—
 
 
—
 
 
56,646
 
 
1%
 
—
 
 
—
 
 
 
 
 
 
 
 
 
 
 
Total costs
 
 
673,767
 
 
37%
 
563,730
 
 
51%
 
1,953,382
 
 
39%
 
1,879,414
 
 
55%
 
 
 
 
 
 
 
 
 
 
Gross Profit
 
 
1,146,457
 
 
63%
 
546,313
 
 
49%
 
3,000,686
 
 
61%
 
1,512,874
 
 
45%
Selling, general and administrative expenses
 
 
1,738,286
 
 
95%
 
1,608,176
 
 
145%
 
5,194,541
 
 
105%
 
3,804,961
 
 
112%
Research and development expenses
 
 
53,678
 
 
3%
 
41,679
 
 
4%
 
155,067
 
 
3%
 
135,300
 
 
4%
 
 
 
 
 
 
 
 
 
 
Loss from operations
 
$
(645,507
)
 
-35%
$
(1,103,542
)
 
-100%
$
(2,348,922
)
 
-47%
$
(2,427,387
)
 
-71%
 
 
 
 
 
 
 
 
 
 
 
Three Months ended September 30, 2005 compared to three months ended September 30, 2004
 
          Total revenues for the three months ended September 30, 2005 and 2004 were $1,820,224 (product sales of $1,567,382 and royalty income of $252,842) and $1,110,043, respectively. The amount of $252,842 or 14% of total revenues is royalty income from granting United Systems Inc. a license to manufacture, market, and sublicense the Ionic White™ to the consumer market.  The $457,339 or 41% increase in net product sales is primarily related to a 134% or $209,347 increase in domestic CompuDent® sales and the increase in handpiece sales of $319,136, offset by a decrease of $101,926 or 51% in international units sales. This increase shows the effect of our investment in our domestic sales force and marketing initiatives while maintaining a strong presence internationally. Domestic handpiece sales increased $161,960 or 28%, while international handpiece sales increased by $157,176 or 135%. This is the result of innovative domestic sales programs where handpieces are bundled with CompuDent® units at the point of sale as well as the success of the bonded handpiece in international markets.  We believe that this will ultimately result in a growing monthly order for handpieces as the initial supply runs out.
 
          For the three months ended September 30, 2005, Milestone generated a gross profit of $1,146,457 or 63% as compared to a gross profit of $546,313 or 49% for the three months ended September 30, 2004. Excluding the net royalty income of $222,501, improvement in gross profit was due to higher domestic sales in this period, which has higher profit margins than international sales.
 
          Selling, general and administrative expenses for the three months ended September 30, 2005 and 2004 were $1,738,286 and $1,608,176, respectively.  The $130,110 or 8% increase is attributable primarily to Milestone’s continued execution of its strategy to develop our domestic sales force and distribution capacity.  Sales headcount increased from 4 managers, 4 inside sales representatives, 9 sales support representatives, and 8 independent contractors at September 30, 2004 to 2 sales managers, 20 inside sales representatives, 3 sales support representatives, and 7 independent contractors at September 30, 2005.  Accordingly, hiring and related employee expenses including sales commissions increased by $102,074 or 16%.  Selling, marketing and advertising expenses including related travel and tradeshows increased by $96,234 or 77%.  This reflects our aggressive marketing strategy to expand the domestic markets.  Legal fees increased by $89,514 or 67% primarily because of the litigation expenses related to the action against the competitor to the Ionic White™ .  Consulting expense increased by $48,013 or 200% due to the engagement of several consultants for market development services.
 
17
 
          Research and development expenses for the three months ended September 30, 2005 and 2004 were $53,678 and $41,679, respectively. These costs are associated with the continued development of our CoolBlue™ Tooth Whitening Systems and CompuFlo™ products, and our consumer tooth whitening product sold under our distributor’s Ionic White™ trademark.
 
          Interest income of $33,132 was earned in the three months ended September 30, 2005 compared to $23,942 earned for the same period of the prior year due to increased average cash balances.
 
          There was no interest expense for the three months ended September 30, 2005 compared to interest expense of $3,576 for the three months ended September 30, 2004. The difference is attributable to the completion of the amortization of debt discount and deferred financing costs in 2004.
 
          Net loss for the three months ended September 30, 2005 and 2004 was $612,375 and $1,083,176, respectively.  The decrease of $470,801 or 43% is primarily because of the increase in total revenue, which is moderately offset by the increase in operating expenses.
 
18
 
Nine months ended September 30, 2005 compared to the nine months ended September 30, 2004
 
          Total revenues for the nine months ended September 30, 2005 and 2004 were $4,954,068 and $3,392,288, respectively.  The 2005 total revenues include product sales of $4,482,016 and royalty income of $472,052.  Total revenues increased by $1,561,780 or 46%.  Contributing to this increase was a $638,358 or 148% increase in domestic sales of CompuDent® units.
 
          Gross profit for the nine months ended September 30, 2005 and 2004 was $3,000,686 or 61% and $1,512,874 or 45%, respectively.  The $1,487,812 or 98% increase in gross profit was due principally to an increase in sales of domestic CompuDent® units which has higher profit margins than international sales, as well as the net royalty income generated by sales of Ionic White™ consumer whitening products and the effect of a $101,608 inventory valuation write down in 2004 which did not recur in the 2005 period.
 
          Selling, general and administrative expenses for the nine months ended September 30, 2005 and 2004 were $5,194,541 and $3,804,961, respectively. The increase of $1,389,580 or 37% in these expenses was anticipated and is consistent with management’s stated strategy of investing in revenue generating areas of the business. Contributing to the increase was hiring and employee related expenses related to the development of Milestone’s national sales force which will benefit Milestone with additional revenues. Legal fees increased by $170,328 or 46% primarily because of the litigation expenses related to the action against the competitor to the Ionic White™ .  The increase of $52,582 or 21% in accounting fees was essentially a result of requirements of the Sarbanes-Oxley Act. Professional fees related to consulting services and investor relations increased by $181,936 or 78% primarily related to the vested portion of stock options granted to outside consultants and the engagement of several outside consultants for marketing services.   Selling, marketing and advertising expenses including related travel and tradeshows increased by $235,991 or 90%.  This reflects our aggressive marketing strategy to expand the domestic markets. 
 
          Research and development expenses for the nine months ended September 30, 2005 and 2004 were $155,067 and $135,300, respectively.  These costs are associated with the continued development of our CoolBlue™ Tooth Whitening Systems and CompuFlo™ products and our consumer tooth whitening product sold under our distributor’s Ionic White™ trademark.
 
          Interest income of $67,814 was earned for the nine months ended September 30, 2005 compared to $64,952 interest income for the same period of the prior year.  This difference was due to the increased average cash balances.
 
          There was no interest expense for the nine months ended September 30, 2005 compared to interest expense of $67,213 for the nine months ended September 30, 2004. The difference is attributable to the extinguishment of debt related to the February 2004 equity placement.
 
          For the reasons explained above, net loss for the nine months ended September 30, 2005 decreased by $148,540 or 6% from the net loss for the nine month period ended September 30, 2004.  The difference is primarily a result of the increase in total revenue which is partially offset by the increase in operating expenses.
 
19
 
Liquidity and Capital Resources
 
          Milestone incurred net losses of approximately $2,281,000 and $2,430,000 and negative cash flows from operating activities of approximately $2,645,000 and $3,196,000 during the nine months ended September 30, 2005 and 2004, respectively.  Milestone improved its liquidity position with the private placement of Units completed in April, and June, 2005, as discussed below.  We have maintained our net worth at $6,000,000 for the three consecutive quarters ended September 30, 2005.  On August 23, 2005, we announced that we had received notice from the American Stock Exchange that we had regained compliance with all continued listing requirements.   The American Stock Exchange has removed the special symbol indicating that we were below continued listing standards, although it will continue to monitor our compliance with continued listing standards.  We will continue to seek new sources of equity funding. 
 
Private Placements
 
          On April 4, 2005 Milestone completed a $2,999,996 private placement of 101,044 Units to accredited investors. Each Unit consisted of 10 shares of Common Stock and two Warrants.  Each Warrant entitles the holder to purchase a share of Common Stock at $4.89 per share through the close of business on February 16, 2009. I-Bankers Securities, Inc. acted as Placement Agent for Milestone in this transaction and received a fee of $209,978 and 101,044 Warrants identical in terms to those issued to the investors.  The Units, which are restricted securities and bear a restrictive legend, are subject to stop transfer restrictions.  Total proceeds to Milestone after commissions and other expenses were $2,730,234.
 
          On June 30, 2005 Milestone completed an $847,960 private placement of 34,000 Units. Each Unit consists of 10 shares of Common Stock and two Warrants.  Each Warrant entitles the holder to purchase a share of Common Stock at $4.89 per share through the close of business on February 16, 2009.  Dynamic Decisions acted as Placement Agent for Milestone in this transaction and received a fee of $50,878 and 600 Units, which are substantially the same form as those issued to the investors.  Total proceeds from this private placement, after commissions and other expenses, were $797,054.
 
Cash flow results
 
          As of September 30, 2005, Milestone had cash and cash equivalents of $3,651,943 and working capital of $5,463,805.
 
          For the nine months ended September 30, 2005, Milestone’s net cash used in operating activities was $2,644,883. This was attributable to a net loss of $2,281,108 adjusted for noncash items totaling $523,175 and an increase in operating assets net of operating liabilities of $886,950.
 
          For the nine months ended September 30, 2005, Milestone used $272,517 in investing activities. This was primarily attributable to the purchase of patent rights for $145,000and $99,602 of legal fees related to new patent applications.  Capital expenditures of $21,552 were primarily for the purchase of molds and tooling for new products.
 
          For the nine months ended September 30, 2005, Milestone generated $3,528,037 from financing activities relating to the private placements discussed above and an employee option exercise.
 
          Management believes that it has sufficient resources to meet its obligations over the next twelve months.
 
20
 
ITEM 3. CONTROLS AND PROCEDURES
 
 
a)
Evaluation of Disclosure Controls and Procedures.  Milestone’s management, with the participation of our chief executive officer and the chief financial officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) as of the end of the period covered by this report (the “Evaluation Date”).  Based upon that evaluation, the chief executive officer and chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  Information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
 
 
 
 
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 financial reporting.
 
21
 
PART II
 
ITEM 2.          UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
Recent Sales of Unregistered Securities
 
          On August 12, 2005, we issued to a nominee of certain partners of Milestone’s legal counsel, 8-year options to buy shares of our common stock at an exercise price of $4.37 per share for services.  The options are exercisable in accordance with their terms for up to a maximum of 1/3 of the shares covered commencing on January 1, 2006 and for an additional 1/3 of the shares covered on each of the first two anniversaries thereof.
 
          On August 31, 2005 we issued 40,000 shares valued at $100,000 to a marketing and sales consultant to aid in the international sale and distribution of CoolBlue™ Wand dental enhancement system.
 
          On September 30, 2005 we issued a total of 39,987 shares valued at $76,375 to two vendors in satisfaction of payables owed in connection with exhibition facilities and warehousing services rendered.
 
          All the above issuances were acquired for investment by accredited investors and were issued without registration under the Securities Act of 1933, as amended, pursuant to the exemptions provided under sections 4(6), 4(2).  All the securities are restricted securities and bear a restrictive legend and are subject to stop transfer restrictions. 
 
22
 
ITEM 6.                EXHIBITS
 
EXHIBIT NO.
  
DESCRIPTION
 
3.1
  
Certificate of Incorporation of Milestone (1)
3.2
  
Certificate of Amendment filed July 13, 1995 (2)
3.3
  
Certificate of Amendment filed December 6, 1996 (3)
3.4
  
Certificate of Amendment filed December 17, 1997 (4)
3.5
  
Certificate of Amendment filed July 23, 2003 (5)
3.6
  
Certificate of Amendment filed January 8, 2004. (5)
3.7
  
Certificate of Designation filed January 15, 2004 (5)
3.8
  
By-laws of Milestone (1)
     
4.1
  
Specimen stock certificate (2)
4.2
  
Intentionally Left Blank
4.3
  
Form of warrant agreement, including form of warrant (6)
     
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.*
 
  
 
*  Filed herewith.
(1)
  
Incorporated by reference to Milestone’s Registration Statement on Form SB-2 No. 33-92324.
 
  
 
(2)
  
Incorporated by reference to Amendment No. 1 to Milestone’s Registration Statement on Form SB-2 No. 333-92324.
 
  
 
(3)
  
Incorporated by reference to Milestone’s Form 10-KSB for the year ended December 31, 1996.
 
  
 
(4)
  
Incorporated by reference to Milestone’s Form 10-KSB for the year ended December 31, 1999.
 
  
 
(5)
  
Incorporated by reference to Milestone’s Registration Statement on Form S-2 No. 333-110376, Amendment No. 3.
 
  
 
(6)
  
Incorporated by reference to Milestone’s Registration Statement on Form S-2 No. 333-110376, Amendment No. 5.
 
23
 
SIGNATURES
 
          In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
MILESTONE SCIENTIFIC INC.
 
 
 
 
 
 
 
          Registrant
 
 
 
 
 
/s/Leonard Osser
 
 
 
 
Leonard Osser Chairman and
 
 
Chief Executive Officer
 
 
 
 
 
/s/Rosaline Shau
 
 
 
 
Rosaline Shau
 
 
Chief Financial Officer
 
 
 
Dated: November 14, 2005
 
 
 
24