SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter ended
| | 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
Milestone Scientific Inc.
(Exact name of registrant as specified in its charter)
| | |
| State or other jurisdiction of Incorporation or organization | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered |
| | |
Securities registered pursuant to section 12(g) of the Act: NONE.
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. ☑
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). ☑
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 | ☐ |
| | ☑ | Smaller reporting company | |
| Emerging Growth Company | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of November 14, 2024 the registrant has a total of
DOCUMENTS INCORPORATED BY REFERENCE
None
MILESTONE SCIENTIFIC INC.
Form 10-Q
TABLE OF CONTENTS
| PART I—FINANCIAL INFORMATION |
||
| Item 1. |
Condensed Consolidated Financial Statements |
|
| Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023 |
4 |
|
| Statements of Operations for the three and nine months ended September 30, 2024 and 2023 (Unaudited) |
5 |
|
| Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2024 and 2023 (Unaudited) |
6 |
|
| Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (Unaudited) |
8 |
|
| Notes to Condensed Consolidated Financial Statements (Unaudited) |
9 |
|
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
29 |
| Item 4. |
Controls and Procedures |
29 |
| PART II—OTHER INFORMATION |
||
| Item 1. |
Legal Proceedings |
29 |
| Item 1A. |
Risk Factors |
29 |
| Item 1C | Cybersecurity | |
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
29 |
| Item 3. |
Defaults Upon Senior Securities |
30 |
| Item 4. |
Mine Safety Disclosures |
30 |
| Item 5. |
Other Information |
30 |
| Item 6. |
Exhibits |
31 |
| Signatures |
32 |
|
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 changes in the distribution of its products and continued evolution 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 that 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 Quarterly Report on Form 10-Q.
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
| September 30, 2024 | December 31, 2023 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities | ||||||||
| Accounts receivable, net of allowance for credit losses of , respectively | ||||||||
| Accounts receivable, related party net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Inventories | ||||||||
| Advances on contracts | ||||||||
| Total current assets | ||||||||
| Furniture, fixtures and equipment, net | ||||||||
| Intangibles, net | ||||||||
| Right of use assets finance lease | ||||||||
| Right of use assets operating lease | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable, related party | ||||||||
| Accrued expenses and other payables | ||||||||
| Accrued expenses, related party | ||||||||
| Accrued liabilities noncontrolling interest | ||||||||
| Current portion of finance lease liabilities | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current portion of finance lease liabilities | ||||||||
| Non-current portion of operating lease liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Common stock, par value $; authorized shares; shares issued and shares outstanding as of September 30, 2024; shares issued and shares outstanding as of December 31, 2023; | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost, shares | ( | ) | ( | ) | ||||
| Total Milestone Scientific, Inc. stockholders' equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MILESTONE SCIENTIFIC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the three months ended September 30, 2024 | For the three months ended September 30, 2023 | For the nine months ended September 30, 2024 | For the nine months ended September 30, 2023 | |||||||||||||
| Product sales, net | $ | $ | $ | $ | ||||||||||||
| Cost of products sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Depreciation and amortization expense | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Gain on sale of net operating losses | ||||||||||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to noncontrolling interests | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net loss attributable to Milestone Scientific Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share applicable to common stockholders— | ||||||||||||||||
| Basic and Diluted | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Weighted average shares outstanding and to be issued— | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MILESTONE SCIENTIFIC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR three and nine months ended September 30, 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 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||
| Common stock issued in public offering net of issuance cost of $ | ||||||||||||||||||||||||||||
| Common Stock issued exercised warrants | ||||||||||||||||||||||||||||
| Common stock issued for payment of consulting services | ||||||||||||||||||||||||||||
| Common stock to be issued to employees for bonuses | ||||||||||||||||||||||||||||
| Common stock issued to board of directors for services | ( | ) | - | - | - | |||||||||||||||||||||||
| Net (loss) | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||
| Common stock issued for payment of consulting services | ||||||||||||||||||||||||||||
| Common stock to be issued to employees for bonuses | 324 | ( | ) | |||||||||||||||||||||||||
| Restricted common stock issued to employees | ( | ) | ||||||||||||||||||||||||||
| Common stock issued to board of directors for services | ) | |||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||
| Common stock issued for payment of consulting services | ||||||||||||||||||||||||||||
| Common stock issued to board of directors for services | ( | ) | ||||||||||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| Common Stock Shares |
Common Stock Amount |
Additional Paid in Capital |
Accumulated Deficit |
Noncontrolling Interest |
Treasury Stock |
Total Stockholder Equity |
||||||||||||||||||||||
| Balance January 1, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Stock based compensation |
- | - | - | |||||||||||||||||||||||||
| Common stock issued to board of directors for services |
( |
) | - | - | - | |||||||||||||||||||||||
| Common stock to be issued to employees for bonuses |
- | - | - | - | - | |||||||||||||||||||||||
| Common stock issued for payment of consulting services |
||||||||||||||||||||||||||||
| Net loss |
- | - | - | ( |
) | ( |
) | - | ( |
) | ||||||||||||||||||
| Balance at March 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Stock based compensation |
- | - | - | - | - | |||||||||||||||||||||||
| Common stock to be issued to employees for bonuses |
- | - | ||||||||||||||||||||||||||
| Common stock issued to board of directors for services |
) | |||||||||||||||||||||||||||
| Common stock issued for payment of consulting services |
||||||||||||||||||||||||||||
| Net loss |
- | - | - | ( |
) | ( |
) | ( |
) | |||||||||||||||||||
| Balance at June 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Stock based compensation |
- | - | ||||||||||||||||||||||||||
| Common stock issued to employee for compensation |
- | - | ||||||||||||||||||||||||||
| Common stock issued for payment of consulting services |
||||||||||||||||||||||||||||
| Common stock issued to board of directors for services |
( |
) | ||||||||||||||||||||||||||
| Net loss |
- | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
| Balance at September 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MILESTONE SCIENTIFIC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR Nine Months Ended
(UNAUDITED)
| September 30, 2024 | September 30, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Amortization of intangibles | ||||||||
| Stock based compensation | ||||||||
| Inventory reserve | ||||||||
| Employees paid in stock | ||||||||
| Expense paid in stock | ||||||||
| Unrealized gain on marketable securities | ||||||||
| Bad debt expense | ||||||||
| Amortization of right-of-use asset | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in accounts receivable | ( | ) | ||||||
| Increase in accounts receivable, related parties | ( | ) | ||||||
| Increase in inventories | ( | ) | ( | ) | ||||
| Decrease (increase) in advances on contracts | ( | ) | ||||||
| Increase in prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Increase in accounts payable | ||||||||
| Increase(decrease) in accounts payable, related party | ( | ) | ||||||
| Decrease in accrued expenses | ( | ) | ( | ) | ||||
| Increase in accrued expenses, related party | ||||||||
| Decrease operating right of use lease asset | ( | ) | ( | ) | ||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| Cash flows from investing activities: | ||||||||
| Purchase of furniture, fixtures, and equipment | ( | ) | ( | ) | ||||
| Sale of marketable securities | ||||||||
| Purchase of marketable securities | ( | ) | ||||||
| Net cash provided by (used in) investing activities | $ | $ | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net proceeds from Public Placement Offering | ||||||||
| Net Proceeds exercise of warrants | ||||||||
| Payments finance lease obligations | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | $ | $ | ( | ) | ||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed 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
The Company current marketing focus is self-distribution using its e-commerce platform; however, it is also in the process of meeting with medical facilities and device distributors within the United States, Middle East and Europe so as to develop other channels of distribution. Certain of our medical instruments have obtained European CE mark approval and can be marketed and sold in most European countries.
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 $
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.
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 the merger of Milestone Medical, Inc., a 98%-owned subsidiary of the Company (“MMD”), with and into Milestone Innovation, Inc, a newly form wholly-owned subsidiary of the Company and being the surviving corporation . As a result, all of the assets of MMD automatically became assets of Milestone Innovations, Inc. Subsequent to September 30, 2024, the Company satisfied it's liabilities to the non-controlling shareholders, the Company settled for approximately $
2. Basis of Presentation
The unaudited condensed 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 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.
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
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 September 30, 2024, and December 31, 2023, Milestone Scientific has approximately $
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 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. As of September 30, 2024, the Company did hold any marketable securities. As of December 31, 2023 the Company held approximately $
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 two 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 September 30, 2024 and December 31, 2023, accounts receivable was recorded, net of allowance for credit losses of $
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:
10. Fair Value of Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date (exit price). The Company required us to classify fair value measurements in one of the following categories.
| ● | Level 1 inputs which are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. |
| ● | Level 2 inputs which are defined as inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly. |
| ● | Level 3 inputs are defined as unobservable inputs for the assets or liabilities. |
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of an input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
As of September 30, 2024 the Company did not have assets measured at fair value on a recurring basis. As of December 31, 2023 the Company had the following assets that were measured at fair value on a recurring basis:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Marketable Securities December 31, 2023 | $ | $ | ||||||||||||||
Marketable Securities included US Treasury securities totaling $
11. Stock-Based Compensation
Milestone Scientific accounts for stock-based compensation under ASC Topic 718, Share-Based Payment (“ASC Topic 718”). ASC Topic 718 requires all share-based payments to employees, non-employees, directors, and officers, including grants of employee stock options, to be recognized in the unaudited consolidated statements of operations over the service period, as an operating expense, based on the grant-date fair values.
12. Recent Accounting Pronouncements
Recently Issued Accounting Pronouncement
In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which provides improvements to reportable segment disclosure requirements, primarily through enhanced disclosures around segment expenses. ASU 2023-07 requires us to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. ASU 2023-07 also requires that the Company disclose an amount for other segment items by reportable segment, a description of their composition and provide all annual disclosures about a reportable segment’s profit or loss and assets pursuant to Topic 280 during interim periods. The Company must also disclose the CODM’s title and position, as well as certain information around the measures used by the CODM and an explanation of how the CODM uses the reported measures in assessing segment performance and deciding how to allocate resources. For public entities with a single reportable segment, the entity must provide all the disclosures required pursuant to ASU 2023-07 and all existing segment disclosures under Topic 280. The amendments of ASU 2023-07 are effective for the Company for annual periods beginning January 1, 2024, and effective for interim periods beginning January 1, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company expects to adopt this standard effective January 1, 2024, at December 31, 2024 on the Company’s annual Form 10-K filing. The Company expects to update all required disclosures pursuant to this ASU 2023-07 at that time. The Company is evaluating the impact of ASU 2023-07 on our financial statements.
In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide improvements primarily related to the rate reconciliation and income taxes paid information included in income tax disclosures. The Company would be required to disclose additional information regarding reconciling items equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory tax rate. Similarly, the Company would be required to disclose income taxes paid (net of refunds received) equal to or greater than five percent of total income taxes paid (net of refunds received). Additionally, the Company would be required to disclose income (loss) from continuing operations before income tax expense disaggregated by foreign and domestic jurisdictions, as well as income tax expense disaggregated by federal, state, and foreign jurisdictions. The amendments in ASU 2023-09 are effective January 1, 2025, including interim periods. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of ASU 2023-09 on our financial statements.
NOTE 4 — INVENTORIES
Inventories consist of the following:
| September 30, 2024 | December 31, 2023 | |||||||
| Dental finished goods | $ | $ | ||||||
| Medical finished goods | ||||||||
| Component parts and other materials | ||||||||
| Total inventories | $ | $ | ||||||
The Company has recorded an allowance on slow moving Medical finished goods due to the slow adoption of the epidural instruments and handpieces for approximately $
NOTE 5 — ADVANCES ON CONTRACTS
The advances on contracts represent funding of future STA devices, epidural instruments, and epidural replacements parts. The balance of the advances on contract as of September 30, 2024 and December 31, 2023 is approximately $
NOTE 6— STOCKHOLDERS’ EQUITY
Public offering
On December 10, 2023, the Company completed a public offering for sale of
On January 12, 2024 the underwriter exercised its over-allotment option as to
Warrants
The following table summarizes information about shares issuable under warrants outstanding as of September 30, 2024:
| Warrant shares outstanding | Weighted Average exercise price | Weighted Average remaining life | Intrinsic value | |||||||||||||
| Outstanding at January 1, 2024 | ||||||||||||||||
| Issued | - | - | ||||||||||||||
| Exercised | ( | ) | - | - | ||||||||||||
| Expired or cancelled | ( | ) | - | - | ||||||||||||
| Outstanding and exercisable at September 30, 2024 | - | |||||||||||||||
During the nine months ended September 30, 2024, the Company issued
Shares to Be Issued
As of September 30, 2024 and 2023, respectively, there were
As of September 30, 2024 and 2023, respectively, there were
The following table summarizes activity for shares to be issued for the nine months periods ending September 30, 2024 and 2023.
| September 30, 2024 | September 30, 2023 | |||||||
| Shares-to-be-issued, outstanding January 1, 2024 and 2023, respectively | ||||||||
| Granted in current period | ||||||||
| Issued in current period | ( | ) | ||||||
| Shares-to be issued outstanding September 30, 2024 and 2023, respectively | ||||||||
Stock Options Plans
The Milestone Scientific Inc., Amended and Restated 2020 Equity Incentive Plan (the “2020 Plan”), provides for awards of restricted common stock restricted stock units, options to purchase and other awards. On June 28, 2023 the 2020 Plan was amended and restated to increase the maximum shares that can be issued thereunder to
Milestone Scientific recognizes compensation expenses over the requisite service period and in the case of performance-based options over the period of the expected performance. For the three and nine months ended September 30, 2024, Milestone Scientific recognized approximately $
As of September 30, 2024, there was $
A summary of option activity for employees under the plans and changes during the nine months ended September 30, 2024 is presented below:
| Number of Options | Weighted Averaged Exercise Price $ | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Options Value $ | |||||||||||||
| Options outstanding at January 1, 2024 | ||||||||||||||||
| Granted during 2024 | - | |||||||||||||||
| Exercised during 2024 | - | - | ||||||||||||||
| Forfeited or expired during 2024 | - | - | ||||||||||||||
| Options outstanding September 30, 2024 | - | |||||||||||||||
| Exercisable, September 30, 2024 | - | |||||||||||||||
A summary of option activity for non-employees under the plans and changes during the nine months ended September 30, 2024 is presented below:
| Number of Options | Weighted Averaged Exercise Price $ | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Options Value $ | |||||||||||||
| Options outstanding at January 1, 2024 | ||||||||||||||||
| Granted during 2024 | - | |||||||||||||||
| Exercised during 2024 | - | - | ||||||||||||||
| Forfeited or expired during 2024 | ( | ) | - | - | ||||||||||||
| Options outstanding September 30, 2024 | ||||||||||||||||
| Exercisable, September 30, 2024 | ||||||||||||||||
For the three and nine months ended September 30, 2024, Milestone Scientific recognized approximately $
The information below summarizes the restricted stock award activity for the nine months ended September 30, 2024.
| Number of Shares | Weighted Average Grant-Date Fair Value per Award | |||||||
| Non-vested as January 1, 2024 | ||||||||
| Granted | 0.89 | |||||||
| Vested | ( | ) | ||||||
| Cancelled | - | |||||||
| Non-vested as September 30, 2024 | 0.89 | |||||||
As of September 30, 2024, all restricted shares granted and deferred under the terms of employment agreements with each Territory Manager of Milestone Scientific are fully vested. For the three and nine months ended September 30, 2024, the Company recognized stock compensation expense of approximately $
As of July 16, 2024, the Company entered into restricted stock agreements with members of the Board of Directors of the Company. The Company granted
NOTE 7 — INCOME TAXES
The utilization of Milestone Scientific's net operating losses may be subject to a substantial limitation due to the "change of ownership provisions" under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carry forwards before their utilization. Milestone Scientific has established a
In April 2024, we received approximately $
Pursuant to the NJEDA program, the Company must retain a physical presence in the state of New Jersey for a period of
NOTE 8 — SEGMENT AND GEOGRAPHIC DATA
The Company conducts its business through reportable segments: Dental and Medical. These segments offer different products and services to different customer bases. The Company provides general corporate services to its segments; however, these services are not considered when making operating decisions and assessing segment performance. These services are reported under “Corporate Services” below and these include costs associated with executive management, investor relations, patents, trademarks, licensing agreements, new instruments developments, financing activities and public company compliance.
The following tables present information about our reportable and operating segments:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| Sales | ||||||||||||||||
| Net Sales: | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Dental | $ | $ | $ | $ | ||||||||||||
| Medical | ||||||||||||||||
| Total net sales | $ | $ | $ | $ | ||||||||||||
| Operating Income (Loss): | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Dental | $ | $ | $ | $ | ||||||||||||
| Medical | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Corporate | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Depreciation and Amortization: | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Dental | $ | $ | $ | $ | ||||||||||||
| Medical | ||||||||||||||||
| Corporate | ||||||||||||||||
| Total depreciation and amortization | $ | $ | $ | $ | ||||||||||||
| Income (loss) before taxes and equity in earnings of affiliates: | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Dental | $ | $ | $ | $ | ||||||||||||
| Medical | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Corporate | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total income (loss) before taxes and equity in earnings of affiliate | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Total Assets | September 30, 2024 | December 31, 2023 | ||||||||||||||
| Dental | $ | $ | ||||||||||||||
| Medical | ||||||||||||||||
| Corporate | ||||||||||||||||
| Total assets | $ | $ | ||||||||||||||
The following table shows a breakdown of Milestone Scientific’s product sales (net), domestically and internationally, by business segment product category:
| Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | |||||||||||||||||||||||
| Domestic: US | Dental | Medical | Grand Total | Dental | Medical | Grand Total | ||||||||||||||||||
| Instruments | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Handpieces | ||||||||||||||||||||||||
| Accessories | ||||||||||||||||||||||||
| Grand Total | ||||||||||||||||||||||||