mlss20240331

mlss20240331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2024

☐	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 of Incorporation or organization	(I.R.S. Employer Identification No.)

425 Eagle Rock Avenue Suite 403, Roseland, NJ 07068

(Address of principal executive offices)

Registrant’s telephone number, including area code: 973-535-2717.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $.001 per share	NYSE American

Securities registered pursuant to section 12(g) of the Act: NONE.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☑ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☑ No

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. ☑

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large, accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☑	Smaller reporting company	☑

Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

As of May 15, 2024, the registrant has a total of 77,227,714 shares of Common Stock, $0.001 par value outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

true

MILESTONE SCIENTIFIC INC.

Form 10-Q

TABLE OF CONTENTS

	PART I—FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements

	Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023	4

	Statements of Operations for the three months ended March 31, 2024 and 2023 (Unaudited)	5

	Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023 (Unaudited)	6

	Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Mine Safety Disclosures	24

Item 5.	Other Information	24

Item 6.	Exhibits	25

Signatures		26

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 of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding events, conditions and financial trends that may affect Milestone Scientific’s future plans of operations, business strategy, results of operations and financial condition. Milestone Scientific 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. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Milestone Scientific’s plans and objectives are based, in part, on assumptions involving the continued expansion of its business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Milestone Scientific. Although Milestone Scientific believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate. Considering the significant uncertainties inherent in the forward-looking statements included herein, our history of operating losses that are expected to continue, requiring additional funding which we may be unable to raise capital when needed (which may force us to delay, curtail or eliminate commercialization efforts of our CompuFlo Epidural Computer Controlled Anesthesia System), the early stage operations of and relative lack of acceptance of our medical products, relying exclusively on two third parties to manufacture our products, changes to our distribution arrangements exposes us to risks of interruption of marketing efforts and building new marketing channels, changes in our informal manufacturing arrangements made by the manufacturer of our products and disruptions at the manufacturing facility of our manufacturers, including shortages of or delays in obtaining chips and other components, exposes us to risks that may harm our business, raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights, if physicians do not accept or use our CompuFlo Epidural Computer Controlled Anesthesia System, our ability to generate revenue from sales will be materially impaired, exposure to the risks inherent in international sales and operations, including China, and developments by competitors may render our products or technologies obsolete or non-competitive, the inclusion of such information should not be regarded as a representation by Milestone Scientific or any other person that the objectives and plans of Milestone Scientific will be achieved. 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 because of various factors. Except as required by the federal securities laws, Milestone Scientific undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K. Milestone Scientific is the owner of the following registered U.S. trademarks: CompuDent®; CompuMed®; CompuFlo®; DPS Dynamic Pressure Sensing technology®; Milestone Scientific ®; CathCheck®; the Milestone logo ®; SafetyWand®; STA Single Tooth Anesthesia Device®; and The Wand ®.

Part I- Financial Information

Item 1. Financial Statements

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31, 2024			December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	4,005,477		$	2,977,713
Marketable securities		1,000,000			2,976,573
Accounts receivable, net of allowance for credit losses of $10,000, respectively		661,838			312,664
Prepaid expenses and other current assets		863,589			517,785
Inventories		2,860,029			2,638,186
Advances on contracts		1,421,120			1,371,548
Total current assets		10,812,053			10,794,469
Furniture, fixtures and equipment, net		8,023			10,024
Intangibles, net		168,956			178,636
Right of use assets finance lease		6,835			8,998
Right of use assets operating lease		330,769			355,235
Other assets		24,150			24,150
Total assets	$	11,350,786		$	11,371,512


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,105,589		$	689,604
Accounts payable, related party		789,317			410,512
Accrued expenses and other payables		1,241,403			1,511,717
Accrued expenses, related party		170,720			137,189
Accrued Liabilities noncontrolling interest		214,000			214,000
Current portion of finance lease liabilities		8,219			10,264
Current portion of operating lease liabilities		107,355			103,427
Total current liabilities		3,636,603			3,076,713
Non-current portion of finance lease liabilities		-			434
Non-current portion of operating lease liabilities		253,774			281,853
Total liabilities	$	3,890,377		$	3,359,000

Commitments

Stockholders’ equity
Common stock, par value $0.001; authorized 100,000,000 shares; 76,632,279 shares issued and 76,598,946 shares outstanding as of March 31, 2024 shares; 75,881,840 shares issued and 75,848,507 shares outstanding as of December 31, 2023;		76,632			75,881
Additional paid in capital		133,075,331			132,187,656
Accumulated deficit		(124,780,038	)		(123,339,509	)
Treasury stock, at cost, 33,333 shares		(911,516	)		(911,516	)
Total Milestone Scientific, Inc. stockholders' equity		7,460,409			8,012,512

Total liabilities and stockholders’ equity	$	11,350,786		$	11,371,512

The accompanying notes are an integral part of these unaudited consolidated financial statements.

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the three months ended March 31, 2024			For the three months ended March 31, 2023

Product sales, net	$	2,248,845		$	2,597,598
Cost of products sold		572,742			708,135
Gross profit		1,676,103			1,889,463

Selling, general and administrative expenses		3,035,276			3,074,572
Research and development expenses		94,211			140,347
Depreciation and amortization expense		11,684			17,220
Total operating expenses		3,141,171			3,232,139

Loss from operations		(1,465,068	)		(1,342,676	)
Interest income (expense)		(3,351	)		23,345
Unrealized Gain Treasury investment		27,890			-
Loss before provision for income taxes		(1,440,529	)		(1,319,331	)
Provision for income taxes		-			-

Net loss		(1,440,529	)		(1,319,331	)
Net loss attributable to noncontrolling interests		-			(11,665	)
Net loss attributable to Milestone Scientific Inc.	$	(1,440,529	)	$	(1,307,666	)

Net loss per share applicable to common stockholders—
Basic and Diluted		(0.02	)		(0.02	)

Weighted average shares outstanding and to be issued—
Basic and Diluted		79,738,551			72,104,234

The accompanying notes are an integral part of these unaudited consolidated financial statements.

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(UNAUDITED)

	Common Stock Shares		Common Stock Amount		Additional Paid in Capital			Accumulated Deficit			Noncontrolling Interest			Treasury Stock			Total Stockholder Equity
Balance January 1, 2024		75,881,840	$	75,881	$	132,187,656		$	(123,339,509	)	$	-		$	(911,516	)	$	8,012,512
Stock based compensation		-		-		313,505			-			-			-			313,505
Common stock issued in public offering net of issuance cost of $42,273		372,110		372		191,784			-			-			-			192,156
Common Stock issued exercised warrants		103,500		104		51,647			-			-			-			51,751
Common stock issued for payment of consulting services		90,170		90		65,971			-			-			-			66,061
Common stock to be issued to employees for bonuses		30,165		31		264,922			-			-			-			264,953
Common stock issued to board of directors for services		154,494		154		(154	)		-			-			-			-
Net loss		-		-		-			(1,440,529	)		-			-			(1,440,529	)
Balance at March 31, 2024		76,632,279	$	76,632	$	133,075,331		$	(124,780,038	)	$	-		$	(911,516	)	$	7,460,409

		Common Stock Shares		Common Stock Amount		Additional Paid in Capital			Accumulated Deficit			Noncontrolling Interest			Treasury Stock			Total Stockholder Equity
Balance January 1, 2023		69,306,497	$	69,306	$	127,478,325		$	(116,410,405	)	$	(219,276	)	$	(911,516	)	$	10,006,434
Stock based compensation						388,772			-			-			-			388,772
Common stock issued to board of directors for services		256,868		258		(258	)		-			-			-			-
Common stock to be issued to employees for bonuses				-		50,000			-			-			-			50,000
Common Stock issued to Consultants		242,335		242		125,758			-			-			-			126,000
Net loss		-		-		-			(1,307,666	)		(11,665	)		-			(1,319,331	)
Balance at March 31, 2023		69,805,700	$	69,806	$	128,042,597		$	(117,718,071	)	$	(230,941	)	$	(911,516	)	$	9,251,875

The accompanying notes are an integral part of these unaudited consolidated financial statements.

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THREE MONTHS ENDED

(UNAUDITED)

	March 31, 2024			March 31, 2023
Cash flows from operating activities:
Net loss	$	(1,440,529	)	$	(1,319,331	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		2,001			4,005
Amortization of intangibles		9,681			13,214
Stock based compensation		313,505			388,772
Employees paid in stock		264,953			50,000
Expense paid in stock		66,061			126,000
Unrealized gain on marketable securities		(27,890	)		-
Amortization of right-of-use asset		24,466			22,579
Changes in operating assets and liabilities:
Increase in accounts receivable		(349,173	)		(218,682	)
Increase in inventories		(221,843	)		(245,963	)
Increase (decrease) in advances on contracts		(49,571	)		170,475
Increase in prepaid expenses and other current assets		(345,804	)		(323,558	)
Increase (decrease) in accounts payable		415,974			(278,822	)
Increase (decrease) in accounts payable, related party		378,807			(351,920	)
Decrease in accrued expenses		(270,310	)		(92,307	)
Increase in accrued expenses, related party		33,532			73,280
Decrease operating right of use lease asset		(21,988	)		(21,330	)
Net cash used in operating activities	$	(1,218,128	)	$	(2,003,588	)

Cash flows from investing activities:
Purchase of furniture, fixtures, and equipment		-			(1,192	)
Sale of Marketable securities		2,004,463			-
Purchase of Marketable securities		-			(4,430,384	)
Net cash provided by (used in) investing activities	$	2,004,463		$	(4,431,576	)

Cash flows from financing activities:
Net proceeds from Public Placement Offering		192,156			-
Net Proceeds exercise of warrants		51,751			-
Payments finance lease obligations		(2,478	)		(2,162	)
Net cash provided by (used in) financing activities	$	241,429		$	(2,162	)

Net increase (decrease) in cash and cash equivalents		1,027,764			(6,437,326	)
Cash and cash equivalents at beginning of period		2,977,713			8,715,279
Cash and cash equivalents at end of period	$	4,005,477		$	2,277,953

The accompanying notes are an integral part of these unaudited consolidated financial statements.

MILESTONE SCIENTIFIC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 — ORGANIZATION AND BUSINESS

All references in this report to “Milestone Scientific,” the “Company” or “Milestone” refer to Milestone Scientific Inc., and its consolidated subsidiaries, Wand Dental, Inc., and Milestone Innovation Inc., unless the context otherwise indicates. Milestone Scientific is the owner of the following registered U.S. trademarks: CompuDent®; CompuFlo®; DPS Dynamic Pressure Sensing technology®; Milestone Scientific ®; CathCheck®; the Milestone logo ®; SafetyWand®; STA Single Tooth Anesthesia System®; and The Wand ®.

Milestone Scientific was incorporated in the State of Delaware in August 1989. Milestone Scientific has developed a proprietary, revolutionary, computer-controlled anesthetic delivery device, its DPS Dynamic Pressure Sensing Technology® System, to meet the needs of various subcutaneous drug delivery injections and fluid aspiration – enabling healthcare practitioners to achieve multiple unique benefits that cannot currently be accomplished with the 160-year-old manual syringe. The Company’s proprietary DPS Dynamic Pressure Sensing technology is the Company’s technology platform that advances the development of next-generation devices. It regulates flow rate and monitoring pressure from the tip of the needle, through platform extensions for local anesthesia for subcutaneous drug delivery, used in various dental and medical injections. It has specific medical applications for epidural space identification in regional anesthesia procedures and intra-articular joint injections.

The Company’s device, using The Wand®, a single use disposable handpiece, is marketed in dentistry under the trademarks CompuDent® and STA Single Tooth Anesthesia System®, and is suitable for all dental procedures that require local anesthetic. The dental devices are currently sold in the United States, Canada and in over 41 other countries. Milestone Scientific also has 510(k) marketing clearance from the U.S. Food and Drug Administration (FDA) on the CompuFlo® Epidural Computer Controlled Anesthesia System in the lumbar thoracic and cervical thoracic junction of the spinal region.

The Company is in the process of meeting with medical facilities and device distributors within the United States, Middle East and Europe. Certain of our medical instruments have obtained European CE mark approval and can be marketed and sold in most European countries.

In 2020, the Company received a Notice of Allowance from the United States Patent and Trademark Office (USPTO) related to its new CompuPulse System, which combines the benefits of our CompuWave technology with a manual syringe. The new CompuPulse System allows one to identify a pulsatile pressure waveform in a variety of applications, thereby improving the reliability and safety of a drug delivery procedure. Importantly, not all procedures require the sophistication of our CompuFlo system, which precisely controls the administration and flow rate of medication as it is being administered. This new technology provides an efficient and low-cost alternative for procedures where a manual syringe may suffice, while still providing the ability to verify needle and subsequent catheter placement.

NOTE 2- LIQUIDITY AND UNCERTAINTIES

The Company has evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company has incurred total losses since inception of $124.8 million. The operating losses were $1.5 million and $1.3 million, for three months ended March 31, 2024 and 2023 respectively. On March 31, 2024, Milestone Scientific had cash and cash equivalents and marketable securities of approximately $5.0 million and working capital of approximately $7.2 million. For three months ended March 31, 2024, and 2023, we had cash flows used in operating activities of approximately $1.2 million and $2.0 million, respectively.

Management has prepared financial forecasts covering a period of 12 months from the date of issuance of these financial statements. These forecasts include several revenue and operating expense assumptions which indicate that the Company’s current cash and liquidity is sufficient to finance the operating requirements for at least the next 12 months from the filing date. Additionally, the Company was approved on September 12, 2023 to sell Net Operating Losses through the New Jersey Technology Business Tax Certificate Transfer Program (“NJ NOL Program”), a program administered by the New Jersey Economic Development Authority (“NJEDA”). On April 8, 2024, the Company completed the net sale of $2.0 million worth of NOLs via the NJ NOL Program. Milestone Scientific is actively pursuing the generation of positive cash flows from operating activities through an increase in revenue from its dental business worldwide, the generation of revenue from its medical devices and disposables business in the United States and worldwide, and a reduction in operating expenses. However, the Company’s continued operations will depend on its ability to raise additional capital through various potential sources until it achieves profitability, if ever.

In addition to its employees, the Company relies on (i) distributors, agents, and third-party logistics providers in connection with product sales and distribution and (ii) raw material and component suppliers in the U.S., Europe, and China. If the Company, or any of these entities encounter any disruptions to its or their respective operations or facilities, or if the Company or any of these third-party partners were to shut down for any reason, including by fire, natural disaster, such as a hurricane, tornado or severe storm, power outage, systems failure, labor dispute, pandemic or other public health crises, or other unforeseen disruption, then the Company or they may be prevented or delayed from effectively operating its or their business, respectively.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Principles of Consolidation

The accompanying consolidated unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), and the applicable rules and regulations of the Securities and Exchange Commission (SEC) include the accounts of Milestone Scientific and its wholly owned and majority owned subsidiaries, including, Wand Dental (wholly owned), and Milestone Innovations Inc. (wholly owned). All significant, intra-entity transactions and balances have been eliminated in the consolidation. Ownership interests in consolidated entities that are held by entities other than us are reported as noncontrolling interests in our consolidated balance sheets. Losses attributed to noncontrolling interests are reported separately in our consolidated statements of operations.

During December 2023, the Board of Directors of the Company approved a resolution to repurchase the remaining minority stake of Milestone Medical, Inc. for $214,000. Concurrently, the Company transferred the net assets of Milestone medical, Inc. to a newly created, wholly owned subsidiary, Milestone Innovations, Inc, a Delaware corporation.

2. Basis of Presentation

The unaudited consolidated financial statements of Milestone Scientific have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information with the instructions for Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring entries) necessary to fairly present such interim results. Interim results are not necessarily indicative of the results of operations which may be expected for a full year or any subsequent period. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2023, included in Milestone Scientific's Annual Report on Form 10-K.

3. Use of Estimates

The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to the inventory valuation and cash flow assumptions regarding evaluations of going concern considerations. The Company bases its estimates on historical experience, known trends and other market-specific or relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

4. Revenue Recognition

The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To perform revenue recognition, the Company performs the following five steps:

i.	identification of the promised goods or services in the contract;
ii.	determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;
iii.	measurement of the transaction price, including the constraint on variable consideration;
iv.	allocation of the transaction price to the performance obligations based on estimated selling prices; and
v.	recognition of revenue when (or as) the Company satisfies each performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606.

The Company derives its revenues from the sale of its products, primarily dental instruments, handpieces, and other related products. The Company sells its products directly to consumers in the United States and through a global distribution network that includes both exclusive and non-exclusive distribution agreements with related and third parties.

Revenue from product sales is recognized upon transfer of control of a product to a customer, generally upon date of shipment. The Company has no obligation on product sales for any installation, set-up, or maintenance, these being the responsibility of the buyer. Milestone Scientific's only obligation after sale is the normal commercial warranty against manufacturing defects if the alleged defective unit is returned within the warranty period.

E-Commerce

As of January 3, 2023, the Company launched an E-Commerce platform, selling and shipping STA Single Tooth Anesthesia Systems® (STA) and handpieces directly to dental offices and dental groups within the United States. Our E-commerce portal accepts online payments via credit and debit cards. The cost of delivery is charged to the customer along with appropriate sales tax. The Company recognizes revenue from product sales at the time the product ships to a customer via a third-party carrier.

Sales Returns

The Company records allowances for product returns as a reduction of revenue at the time product sales are recorded. Several factors are considered in determining whether an allowance for product returns is required, including the customers’ return rights and the Company’s historical experience with returns and the amount of product in the distribution channel not consumed by end users and subject to return. The Company relies on historical return rates to estimate returns.

The Company terminated its major U.S. distributor contract as of December 31, 2022. That distributor had return rights in connection with this contract termination that extended through March 31, 2023. The Company recorded allowance of approximately $179,000 for those returns within its December 31, 2022 financial statements. As of March 31, 2023 no returns were presented, and the Company reversed the allowance for sales returns. As of March 31, 2024, the company recorded no sales returns.

Financing and Payment

The Company's payment terms differ by geography and customer, but payments from distributors are required within 90 days or less from the date of shipment. The E-commerce portal sells directly to end users and accepts online payments via credit and debit cards via a third-party. These payments from the third party are typically settled within two business days.

Disaggregation of Revenue

The Company operates in two operating segments: dental and medical. Therefore, the results of the Company's operations are reported on a consolidated basis for the purposes of segment reporting, consistent with internal management reporting. See Note 8 for revenues by geographical market, based on the customer’s location, and product category for the three months ended March 31, 2024, and 2023, respectively.

5. Cash and Cash Equivalents

Milestone Scientific considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of March 31, 2024 and December 31, 2023, Milestone Scientific has approximately $4.0 million and $3.0 million, respectively of cash and cash equivalents. As of March 31, 2024, Milestone Scientific had approximately $3.4 million in cash, cash equivalents, and marketable securities in accounts that exceeded the Federal Deposit Insurance Corporation insurance limit of $250,000.

6. Marketable Securities

The Company’s marketable securities are comprised of treasury bills with original maturity greater than three months from date of purchase. The Company’s marketable securities are measured at fair value and are accounted for in accordance with ASC 825, Financial Instruments. Unrealized holding gains and losses on treasury bills are recorded in interest income on the unaudited condensed consolidated statements of operations. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of the marketable securities.

The appropriate classification of marketable securities is determined at the time of purchase and evaluated as of each reporting balance sheet date. Investments in marketable debt and equity securities classified as available-for-sale are reported at fair value. Fair value is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Declines in the fair values of equity securities that are considered other-than-temporary, are charged to other income (expense), net. The Company considers available evidence in evaluating potential impairments of its investments, including the duration and extent to which fair value is less than cost. As of March 31, 2024, the Company held approximately $1.0 million in U.S. treasury securities, with maturity dates within 3 and 6 months of the balance sheet date.

7. Accounts Receivable

The E-commerce portal sells directly to end users and accepts online payments via credit and debit cards via a third-party credit card processor. These payments are settled within 2 business days of the transactions. Sales to distributors are on credit terms. The Company estimates losses from the ability or inability of its distributor to make payments on amounts billed.

Distributors credit sales are due 90 days or less from the date of invoicing. As of March 31, 2024 and December 31, 2023, accounts receivable was recorded, net of allowance for credit losses of $10,000, respectively.

8. Inventories

Inventories principally consist of finished goods and component parts stated at the lower of cost (first-in, first-out method) or net realizable value. Inventory quantities on hand are reviewed on a quarterly basis and a provision for excess, slow moving, defective, and obsolete inventory is recorded if required based on past and expected future sales, potential technological obsolescence, and product expiration requirements.

The valuation allowance creates a new cost basis for the inventory, and it is not subsequently marked up through a reduction in the valuation allowance based on any changes in the underlying facts and circumstances. When the valuation allowance is initially recorded, the increase to the allowance is recognized as an increase in cost of sales. The valuation allowance is only reduced if or when the underlying inventory is sold or destroyed, at which time cost of sales recognized would include the previous adjusted cost basis.

9. Basic and Diluted Net Loss Per Common Share

Milestone Scientific presents “basic” earnings (loss) per common share applicable to common stockholders and, if applicable, “diluted” earnings (loss) per common share applicable to common stockholders pursuant to the provisions of ASC 260, “Earnings per Share”. Basic earnings (loss) per common share is calculated by dividing net income or loss applicable to common stockholders by the weighted average number of common shares outstanding and to be issued common shares as follows: 79,738,551 and 72,104,234 for the three months ended March 31, 2024 and 2023, respectively. The calculation of diluted earnings per common share is like that of basic earnings per common share, except that the denominator is increased to include the number of

SEC Form 10-Q filed by Milestone Scientific Inc.