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 March 31, 1998
OR
[_] 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 0-26284
MILESTONE SCIENTIFIC INC.
-------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3545623
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State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
220 South Orange Avenue, Livingston, New Jersey 07039
-----------------------------------------------------
(Address of principal executive office) (Zip Code)
(973) 535-2717
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(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) of 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 |X| No |_|
As of May 1, 1998 the Registrant had a total of 8,793,588 shares of Common
Stock, $.001 par value, outstanding.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page
ITEM 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets (unaudited)
at March 31, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations
(unaudited) for the three months
ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
(unaudited) for the three months ended
March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations 7
PART II. OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8-K 8
SIGNATURES 9
2
<PAGE>
Part 1. Financial Information
ITEM 1. Condensed Consolidated Financial Statements
Milestone Scientific Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31
1998 December 31
(unaudited) 1997
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 5,644,940 $ 9,775,019
Investments - Treasury Bills 7,834,091 5,778,369
Accounts receivable 3,750,273 318,147
Inventories 831,706 1,249,628
Prepaid expenses 235,856 97,779
------------ ------------
Total current assets 18,296,866 17,218,942
PROPERTY AND EQUIPMENT, NET 2,371,860 762,882
PATENTS 1,919,695 1,980,834
OTHER ASSETS 33,080 33,406
------------ ------------
$ 22,621,501 $ 19,996,064
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit - bank $ 150,000 $ 175,000
Accounts payable 1,787,919 1,053,955
Accrued expenses 668,738 247,433
------------ ------------
Total current liabilities 2,606,657 1,476,388
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, par value $.001; authorized,
25,000,000 shares; issued and outstanding,
8,793,588 and 8,661,866 shares, respectively 8,794 8,662
Additional paid-in capital 29,822,440 28,685,483
Accumulated deficit (9,816,390) (10,174,469)
------------ ------------
Total stockholders' equity 20,014,844 18,519,676
------------ ------------
Total liabilities and stockholders'
equity $ 22,621,501 $ 19,996,064
============ ============
See notes to condensed consolidated financial statements.
3
<PAGE>
Milestone Scientific Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31,
(unaudited)
1998 1997
----------- -----------
Revenues $ 5,260,149 $ 760,123
Cost of Sales 2,681,891 471,572
----------- -----------
Gross Profit 2,578,258 288,551
Selling, general and administrative expenses 2,259,491 924,511
Research and development expenses 130,167 65,654
----------- -----------
2,389,658 990,165
Income (loss) from operations 188,600 (701,614)
----------- -----------
Other income
Interest income (net) 169,479 3,592
Minority interest in net loss of subsidiary -- 1,994
----------- -----------
169,479 5,586
----------- -----------
NET INCOME (LOSS) $ 358,079 $ (696,028)
----------- -----------
Income (loss) per share - basic and diluted $ .04 $ (0.14)
=========== ===========
Weighted average shares outstanding 8,733,373 4,840,527
=========== ===========
See notes to condensed consolidated financial statements.
4
<PAGE>
Milestone Scientific Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31,
(unaudited)
1998 1997
----------- -----------
Cash flows from operating activities
Net Income (loss) $ 358,079 $ (696,028)
Adjustments to reconcile net loss to
net cash used in operating activities
Amortization and depreciation 110,260 66,255
Compensation expense 94,805 65,000
Changes in assets and liabilities
Other assets 326 (2,527)
Accounts receivable (3,432,126) (163,197)
Inventories 417,922 21,776
Prepaid expenses (138,077) (75,550)
Accounts payable 733,964 14,214
Accrued expenses 421,305 29,108
Notes payable (25,000) --
----------- -----------
Net cash used in operating activities (1,458,542) (740,949)
----------- -----------
Cash flows from investing activities
Capital expenditures (1,658,099) (51,439)
Acquisition costs of minority
interest in Spintech -- (5,392)
Purchase of Treasury Bills (2,055,722) --
----------- -----------
Net cash used in investing activities (3,713,821) (56,831)
----------- -----------
Cash flows from financing activities
Net proceeds from issuance of common stock 1,042,284 3,390,738
----------- -----------
Net cash provided by financing activities $ 1,042,284 $ 3,390,738
----------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (4,130,079) 2,592,958
Cash and cash equivalents at beginning of Period 9,775,019 779,359
----------- -----------
Cash and cash equivalents at end of Period $ 5,644,940 $ 3,372,317
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 4,841 $ 5,812
----------- -----------
See notes to condensed consolidated financial statements.
5
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The unaudited interim financial statements of Milestone Scientific Inc.
and Subsidiaries (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring
entries) necessary to present fairly the financial position as of March
31, 1998, and the results of operations, changes in stockholders' equity
and cash flows for the three-month period ended March 31, 1998.
The results reported for the three-month period ended March 31, 1998 are
not necessarily indicative of the results of operations which may be
expected for a full year.
NOTE 2 - EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 requires the
presentation of basic earnings per share and, for companies with complex
capital structures or potentially dilutive securities, such as convertible
debt, options, and warrants, diluted earnings per share.
Basic earnings per common share are computed using the weighted average
number of common shares outstanding. Diluted earnings per common share are
computed using the weighted average common shares outstanding after giving
effect to potential common stock from stock options based on the treasury
stock method, plus any other potentially dilutive securities outstanding,
such as the convertible subordinated notes. If the result of assumed
conversions is dilutive, net earnings are adjusted for interest expense on
the convertible subordinated notes, while the average share of common
stock outstanding are increased.
For the three months ended March 31, 1998, the assumed exercise of certain
dilutive options and warrants did not have a significant impact on the
basic earnings per share and accordingly, basic and diluted earnings per
share of $.04 are presented in the accompanying financial statements.
6
<PAGE>
Options and warrants, in aggregate, to purchase 157,000 shares of common
stock at prices ranging from $21.25 to $23 per share were issued during
the quarter ended March 31, 1998 but were not included in the computation
of diluted earnings per share because their exercise price was greater
than the average market price of the common shares.
During the quarter ended March 31, 1998 warrants to purchase 131,722
shares of common stock were exercised at prices ranging from $4.72 to $9
for which the company realized proceeds of $1,042,277.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Three Months Ended March 31, 1998 as compared to the Three Months Ended
March 31, 1997.
Statement of Operations
Revenues and Cost of Goods Sold increased to $5,260,149 and $2,681,891
respectively in 1998 from $760,123 and $471,572 in 1997 an increase of
$4,500,026 and $2,210,319. These increases are primarily due to the sales of The
Wand(TM) (a computer controlled "painless" injection system).
Selling, General and Administrative expenses increased to $2,259,491 in 1998
from $924,511 in 1997 an increase of $1,334,980. The increase is primarily due
to costs associated with The Wand(TM), including sales commissions of $357,000,
an increase in marketing costs of approximately $390,000 and other increases
including salaries and overhead. Legal fees increased by approximately $120,000
as a result of the Spinello dispute and complying with general regulatory
requirements. In addition, an expense of $94,805 was incurred as a result of a
noncash exercise of warrants.
Research and Development costs increased to $130,167 in 1997 from $65,654 in
1997, an increase of $64,513 reflecting increased costs to develop "The
Wand(TM)".
Net Interest income increased to $169,479 from $3,592 in 1997, an increase of
$165,887 primarily as a result of investing the net proceeds of two private
placements completed during 1997.
Liquidity and Capital Resources
At March 31, 1998, the Company's working Capital was $15,690,209, primarily
reflecting the net cash proceeds from the September private placement and from
the exercise of warrants. In 1998, the company received proceeds of $1,042,284
from the exercise of warrants.
The company intends to use the funds for development engineering, tooling,
marketing and other expenses associated with the introduction of "The Wand(TM)",
development of other products and general corporate purposes including working
capital.
7
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1998.
8
<PAGE>
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)
Date: 5/1/98 /s/ DANIEL R. MARTIN
--------------------------------------------
DANIEL R. MARTIN
President and Acting Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,644,960
<SECURITIES> 7,834,091
<RECEIVABLES> 3,750,273
<ALLOWANCES> 0
<INVENTORY> 831,706
<CURRENT-ASSETS> 18,296,866
<PP&E> 2,371,860
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,621,051
<CURRENT-LIABILITIES> 2,606,657
<BONDS> 0
0
0
<COMMON> 8,794
<OTHER-SE> 20,006,050
<TOTAL-LIABILITY-AND-EQUITY> 22,621,501
<SALES> 5,260,149
<TOTAL-REVENUES> 5,260,149
<CGS> 2,681,891
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,389,658
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 358,079
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 358,079
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
