-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WxCsjbIogKzUKqIagX/XXW3BUzqqU/5KIrC2D3Iv9HB+MXU00H/aR+NbGdL2kc7W LrsaJRblN/alxJlWF983ow== 0001005477-97-001409.txt : 19970515 0001005477-97-001409.hdr.sgml : 19970515 ACCESSION NUMBER: 0001005477-97-001409 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MILESTONE SCIENTIFIC INC/NJ CENTRAL INDEX KEY: 0000855683 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 133545623 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-26284 FILM NUMBER: 97605118 BUSINESS ADDRESS: STREET 1: 44 KEAN ROAD CITY: SHORT HILLS STATE: NJ ZIP: 07078 BUSINESS PHONE: 2013793171 MAIL ADDRESS: STREET 1: 44 KEAN ROAD CITY: SHORT HILLS STATE: NJ ZIP: 07078 FORMER COMPANY: FORMER CONFORMED NAME: U S OPPORTUNITY SEARCH INC DATE OF NAME CHANGE: 19920703 10QSB 1 FORM 10-QSB 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, 1997 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 --------------------------- ---------------- 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) (201) 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) 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 8, 1997 the Registrant had a total of 5,562,774 shares of Common Stock, $.001 par value, outstanding. INDEX PART I. FINANCIAL INFORMATION Page ITEM 1. Consolidated Financial Statements Consolidated Balance Sheet (unaudited) at March 31, 1997 and December 31, 1996 3 Consolidated Statements of Operations (unaudited for the three months ended March 31, 1997 and 1996 4 Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 1997 (unaudited) and the year ended December 31, 1996 5 Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 1997 and 1996 6 Notes to Consolidated Financial Statements 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION 12 ITEM 1. Legal Proceedings 12 ITEM 6. Exhibits and reports on Form 8-K 12 SIGNATURES 14 2 Milestone Scientific Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS ASSETS
(unaudited) March 31 December 31 1997 1996 CURRENT ASSETS Cash and cash equivalents $ 3,372,317 $ 779,359 Accounts receivable 486,943 323,746 Inventories 486,951 508,727 Prepaid expenses 113,249 20,788 ------------ ----------- Total current assets 4,459,460 1,632,620 PROPERTY AND EQUIPMENT, NET 306,385 281,378 PATENTS 1,983,082 2,039,816 DEFERRED FINANCING COSTS 635,000 OTHER ASSETS 159,124 68,132 ------------ ----------- $ 6,908,051 $ 4,656,946 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Line of credit - bank $ 75,000 $ 75,000 Accounts payable 497,751 483,537 Accrued expenses 131,418 102,310 Deferred revenue 38,517 38,517 ------------ ----------- Total current liabilities 742,686 699,364 ------------ ----------- STOCKHOLDERS' EQUITY Common stock, par value $.001; authorized, 10,000,000 shares; issued and outstanding, 5,562,774 shares at March 31, 1997 Additional paid-in capital 5,562 4,633 Deficit 9,657,223 6,819,341 Unearned compensation (3,432,380) (2,736,352) (65,040) (130,040) ------------ ----------- 6,165,365 3,957,582 ------------ ----------- $ 6,908,051 $4,656,946 ============ ===========
See notes to consolidated financial statements 3 Milestone Scientific Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended March 31, (unaudited)
1997 1996 ------------ ----------- Revenues $ 760,123 $ 74,358 Cost of Sales 471,572 52,526 ------------ ----------- Gross Profit 288,551 21,832 ------------ ----------- Selling, general and administrative expenses 924,511 416,189 Research and development expenses 65,654 37,798 ------------ ----------- 990,165 453,987 ------------ ----------- Loss from operations (701,614) (432,155) ------------ ----------- Other income Interest income (net) 3,592 23,714 Other income (net) 1,994 7,926 Minority interest in net loss of subsidiary - 67,073 ------------ ----------- 5,586 98,713 ------------ ----------- NET LOSS (696,028) $ (333,442) ============ =========== Loss per share $(.14) $(.07) ============ =========== Weighted average shares outstanding 4,840,527 4,480,000 ============ ===========
See notes to consolidated financial statements. 4 Milestone Scientific Inc. and Subsidiaries CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the year ended December 31, 1996 and the three months ended March 31, 1997 (unaudited)
Common Stock Additional ------------ paid-in Unearned Shares Amount capital Deficit compensation Total --------- ---------- --------- ----------- ------------- --------- Balance, January 1, 1996 4,480,000 $4,480 $5,690,895 $(786,824) $(390,040) $4,518,511 Shares issued in connection with the business combinations accounted for as purchases 23,350 23 111,076 111,099 Shares issued to Consultants 130,000 130 382,370 382,500 Compensation expense 260,000 260,000 Warrants issued to placement agent 635,000 635,000 Net loss for the year ended December 31, 1996 (1,949,528) (1,949,528) --------- ---------- --------- ----------- --------- --------- Balance, December 31, 1996 4,633,350 4,633 6,819,341 (2,736,352) (130,040) 3,957,582 Private Placement of Units 852,262 852 2,347,702 2,348,554 Compensation expense 65,000 65,000 Shares Issued For Capital Assets 12,000 12 80,238 80,250 Shares issued to Consultants 58,000 58 369,692 369,750 Shares issued in connection with conversion offer to minority Shareholders of Spintech 7,162 7 40,250 40,257 Net loss for the three months ended March 31, 1997 (696,028) (696,028) --------- ---------- --------- ----------- --------- --------- Balance, March 31, 1997 5,562,774 $5,562 $9,657,223 ($3,432,380) $(65,040) $6,165,365
See notes to consolidated financial statements. 5 Milestone Scientific Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended March 31, (unaudited)
1997 1996 ----------- ----------- Cash flows from operating activities Net loss $(696,028) $(333,442) Adjustments to reconcile net loss to net cash used in operating activities Amortization of excess of purchase price over tangible net assets 57,385 Amortization and depreciation 66,255 947 Loss applicable to minority interest (67,073) Compensation expense 65,000 65,000 Changes in assets and liabilities (Increase) in other assets (2,527) (3,138) (Increase) in accounts receivable (163,197) (10,293) Decrease (Increase) in inventories 21,776 (9,862) (Increase) Decrease in prepaid expenses (75,550) 927 Increase in accounts payable 14,214 37,175 (Decrease) increase in accrued expenses 29,108 (10,004) ----------- ----------- Net cash used in operating activities (740,949) (272,378) ----------- ----------- Cash flows from investing activities Capital expenditures (51,439) (83,975) Acquisition costs of minority interest in Spintech (5,392) - ----------- ----------- Net cash used in investing activities (56,831) (83,975) ----------- ----------- Cash flows from financing activities Net proceeds from private placement 3,390,738 - ----------- ----------- Net cash provided by financing activities $3,390,738 - ----------- ----------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 2,592,958 (356,353) Cash and cash equivalents at beginning of Period 779,359 2,331,639 ----------- ----------- Cash and cash equivalents at end of Period $3,372,317 $1,975,286 =========== ===========
See notes to consolidated financial statements. 6 Milestone Scientific Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) For the three months ended March 31, (unaudited)
1997 1996 ---------- ---------- Supplemental disclosures of cash flow information: Cash paid during the year for Income taxes $ - $ - ---------- ---------- Interest $ 5,812 $ - ---------- ----------
In 1997, 54,000 shares of common stock were issued for services performed associated with the 1997 private placement. The value of the above shares, deferred financing and other costs incurred in 1996 were applied against the net proceeds in 1997. In 1997, 12,000 shares of common stock were issued in exchange for capital assets to be delivered in 1997. Since the capital assets were not yet received such amount is included in other assets. In 1997, 7,162 shares of common stock were issued in exchange for approximately 469 shares of Spintech common stock (approximately 1%). The value of the stock and associated legal costs at date of acquisition is shown in other assets. See notes to consolidated financial statements. 7 Milestone Scientific Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 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, 1997, and the results of operations, changes in stockholders' equity and cash flows for the three-month periods ended March 31, 1997 and 1996, respectively. The results reported for the three-month period ended March 31, 1997 are not necessarily indicative of the results of operations which may be expected for a full year. NOTE 2 - ACQUISITIONS PRINCETON PMC In March 1996, the Company, entered into a shareholder's agreement to form Princeton PMC, a corporation, to engage in the marketing and sale of dental products. The Company contributed $85,000 for 200 shares of this entity representing a two-thirds ownership. Only the March 31, 1997 Consolidated Financial Statements include the operating results of Princeton PMC. In November 1996, the Company purchased the remaining one-third of Princeton PMC's outstanding stock for 100 shares of its common stock. The acquisition has been recorded using the purchase method of accounting. The purchase price approximated the net tangible assets acquired. WISDOM In December 1996, the Company completed the purchase of Wisdom's outstanding stock by issuing 23,250 shares of its common stock valued at $110,437. The acquisition has been recorded using the purchase method of accounting. The cost was less than the subsidiary's net assets at the date of acquisition. The excess of net assets over cost has been applied to reduce the amounts assigned to noncurrent assets of the subsidiary. Only the March 31, 1997 Consolidated Financial Statements include the operating results of Wisdom. 8 Milestone Scientific Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 NOTE 2 - ACQUISITIONS (continued) SPINTECH In November 1995, the Company completed the purchase of 65% of Spintech's outstanding stock on a fully diluted basis for $2,700,000. The Company paid $2,026,495, which represents the $2,700,000 less amounts advanced to Spintech amounting to $632,500 plus interest of $41,005. The acquisition has been recorded using the purchase method of accounting. The excess of the aggregate purchase price over the net tangible assets acquired was allocated to patents and is being amortized over ten years. The operating results of Spintech have been included in the Company's consolidated financial statements since the date of acquisition. The minority interest has been valued at zero as of March 31, 1997. In January 1997 the Company offered to minority shareholders of Spintech to exchange 1 Spintech share for 15.27 shares of Milestone. This offer is for restricted shares. As of March 31, 1997, 469 shares of Spintech were converted, which increased Milestone's ownership of Spintech to 66%. The value of the converted shares and associated legal costs are shown in other assets, as a result of the value being in excess of the tangible net assets of Spintech. NOTE 3 - PRIVATE PLACEMENT In March 1997, the company sold, in a private placement, an aggregate of 852,262 units at $4.72 per unit for net cash proceeds of $3,390,738, less non cash costs for shares issued in connection with the private placement of $1,042,184 for a net amount of $2,348,554. Each unit consisted of one share of common stock and one common stock purchase warrant. Each warrant entitles the holder to purchase one share of common stock for three years from the closing of the offering at an exercise price of $4.72 per share. In addition, the placement agent received warrants to purchase 85,226 units at $4.72 per unit. 9 Milestone Scientific Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 NOTE 4 - LITIGATION On March 26, 1997, Milestone and Spintech commenced legal action in the United States District court of New Jersey against Ronald Spinello, DDS, Chairman and Director of Research of Spintech. In the complaint, plaintiffs seek recovery of compensatory and punitive damages in excess of $4,000,000 for extortion and tortious interference with existing and prospective contract and business relationships, a declaratory judgment that Dr. Spinello has no personal rights to certain technology developed while he was employed as Director of Research of Spintech relating to the design and production of ancillary components of its computer controlled local anesthetic delivery system, a declaratory judgment that plaintiffs have not breached Dr. Spinello's employment agreement or the agreement for the purchase by Milestone of a 65% equity interest in Spintech and injunctive relief. No answer has yet been filed. Milestone has been advised by its patent counsel that all technology developed by Dr. Spinello while employed by Spintech is owned by Spintech. The Company believes that ownership of the technology relating to these ancillary components which are the subject of this litigation in no way prevents the manufacture and sale of its anesthetic delivery system at economically viable prices. 10 Management's Discussion and Analysis or Plan of Operation In March 1997, the company consummated a private placement of registered securities through a placement agent. The company received gross proceeds of $4,022,500 for 852,262 units, each consisting of one share of Common Stock and one Common Stock Purchase Warrant exercisable at $4.72 per share. The private placement was over subscribed and the company accepted subscriptions for more than the maximum number of units offered. Statement of Operations Revenues and Cost of Goods Sold increased to $740,123 and $471,572 respectively in 1997 from $74,358 and $52,526 in 1996 an increase of $658,765(922%) and $419,146(797%), primarily a result of the acquisition of Wisdom in December 1996. Selling, General and Administrative expenses increased to $924,511 in 1997 from $416,189 in 1996 an increase of $508,382(122%) reflecting, primarily the acquisition of Wisdom and higher marketing and administrative costs as the company positions itself for expected higher levels of operations. Research and Development costs increased to $65,654 in 1997 from $37,798 in 1996, an increase of $27,856 reflecting increased costs to develop the Wand. Net Interest decreased to $3,592 in 1997 from $23,714 in 1996, a decrease of $20,122, primarily a result of the use of the proceeds from the public offering in late 1995. Liquidity and Capital Resources At March 31, 1997, the Company's working Capital was $3,716,774, primarily reflecting the net cash proceeds of $3,390,738 from the private placement. The company intends to use the funds for development engineering, tooling, marketing and other expenses associated with the introduction of "The Wand", development of other products and general corporate purposes including working capital. 11 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings On March 26, 1997, Milestone and Spintech commenced legal action in the United States District court of New Jersey against Ronald Spinello, DDS, Chairman and Director of Research of Spintech. In the complaint, plaintiffs seek recovery of compensatory and punitive damages in excess of $4,000,000 for extortion and tortious interference with existing and prospective contract and business relationships, a declaratory judgment that Dr. Spinello has no personal rights to certain technology developed while he was employed as Director of Research of Spintech relating to the design and production of ancillary components of its computer controlled local anesthetic delivery system, a declaratory judgment that plaintiffs have not breached Dr. Spinello's employment agreement or the agreement for the purchase by Milestone of a 65% equity interest in Spintech and injunctive relief. No answer has yet been filed. Milestone has been advised by its patent counsel that all technology developed by Dr. Spinello while employed by Spintech is owned by Spintech. The Company believes that ownership of the technology relating to these ancillary components which are the subject of this litigation in no way prevents the manufacture and sale of its anesthetic delivery system at economically viable prices. ITEM 6. Exhibits and reports on Form 8-K (a) Exhibits 10.1 Form of Warrant Agreement dated as of March 13, 1997.(1) 10.2 Agency Agreement dated February 4, 1997.(2) 10.3 Form of Purchase Option granted to the Placement Agent and Designees dated as of March 13, 1997.(3) - -------------------- (1) Incorporated by reference to exhibit 99.1 of the Company's Registration Statement on Form S-3 No. 333-26237. (2) Incorporated by reference to exhibit 99.2 of the Company's Registration Statement on Form S-3 No. 333-26237. (3) Incorporated by reference to exhibit 99.3 of the Company's Registration Statement on Form S-3 No. 333-26237. 12 (b) Reports on Form 8-K: The Registrant filed the following report on Form 8-K during the quarter ended March 31, 1997. Date Item Reported March 13, 1997 Item 5. Other Events Item 7. Financial Statements, Pro Forma Financial Information and Exhibits 13 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: May 12, 1997 /s/ Leonard Osser ------------------------------------- LEONARD OSSER President, Chief Executive Officer and Chief Financial and Accounting Officer 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the financial statements contained in the Registrant's Form 10-QSB for the quarter ending March 31, 1997 and is qualified in its' entirety by reference to such financial statements. 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 3,372,317 0 486,943 0 486,951 4,459,460 306,385 0 6,908,051 742,686 0 0 0 5,562 6,159,803 6,908,051 0 760,123 471,572 471,572 990,165 0 0 (696,028) 0 0 0 0 0 (696,028) (.14) 0
-----END PRIVACY-ENHANCED MESSAGE-----