UNITED STATES
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 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. ☑
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 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 | ☐ |
| | ☑ | 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
As of May 15, 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 |
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| Item 1. |
Condensed Consolidated Financial Statements |
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| 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 |
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| 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 | $ | $ | |||||
| Marketable securities | |||||||
| Accounts receivable, net of allowance for credit losses of $, respectively | |||||||
| 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 | |||||||
| Stockholders’ equity | |||||||
| Common stock, par value $; authorized shares; shares issued and shares outstanding as of March 31, 2024 shares; 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 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 |
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| Product sales, net |
$ | $ | ||||||
| Cost of products sold |
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| Gross profit |
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| Selling, general and administrative expenses |
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| Research and development expenses |
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| Depreciation and amortization expense |
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| Total operating expenses |
||||||||
| Loss from operations |
( |
) | ( |
) | ||||
| Interest income (expense) |
( |
) | ||||||
| Unrealized Gain Treasury investment |
||||||||
| Loss before provision for income taxes |
( |
) | ( |
) | ||||
| 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 |
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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 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 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 | 30,165 | |||||||||||||||||||||||||||
| Common stock issued to board of directors for services | ( | ) | - | - | - | |||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 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 to Consultants | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
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 |
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| Cash flows from operating activities: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation expense |
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| Amortization of intangibles |
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| Stock based compensation |
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| Employees paid in stock |
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| Expense paid in stock |
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| Unrealized gain on marketable securities |
( |
) | ||||||
| Amortization of right-of-use asset |
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| Changes in operating assets and liabilities: |
||||||||
| Increase in accounts receivable |
( |
) | ( |
) | ||||
| Increase in inventories |
( |
) | ( |
) | ||||
| Increase (decrease) in advances on contracts |
( |
) | ||||||
| Increase in prepaid expenses and other current assets |
( |
) | ( |
) | ||||
| Increase (decrease) 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: |
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| 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: |
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| Net proceeds from Public Placement Offering |
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| 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 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 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 $
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 $
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 $
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 $
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 March 31, 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 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 $
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 $
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 March 31, 2024, the Company has the following assets that were measured at fair value on a recurring basis.
As of March 31, 2024, and December 31, 2023 the Company has the following assets that were measured at fair value on a recurring basis:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Marketable Securities March 31, 2024 | $ | $ | $ | $ | ||||||||||||
| 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 condensed 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 will evaluate the impact of ASU 2023-09 on our financial statements.
Recently Adopted Accounting Pronouncement
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the guidance on measuring credit losses for certain financial assets measured at amortized cost, including trade receivables. The FASB has subsequently issued several updates to the standard, providing additional guidance on certain topics covered by the standard. This update requires entities to recognize an allowance for credit losses using a forward-looking expected loss impairment model, taking into consideration historical experience, current conditions, and supportable forecasts that impact collectability. As January 1, 2023, the Company adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) the adoption of this ASU does not have a material impact on our financial statements.
NOTE 4 — INVENTORIES
Inventories consist of the following:
| March 31, 2024 |
December 31, 2023 |
|||||||
| Dental finished goods |
$ | $ | ||||||
| Medical finished goods |
||||||||
| Component parts and other materials |
||||||||
| Total inventories |
$ | $ | ||||||
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 as of March 31, 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
In connection with the Company's capital raise on December 10, 2023, on January 12, 2024 the underwriter exercised its over-allotment option as to
During the three months ended March 31, 2024, the Company issued
Warrants
The following table summarizes information about shares issuable under warrants outstanding as of March 31,2024:
| 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 March 31, 2024 | - | |||||||||||||||
Shares to Be Issued
As of March 31, 2024 and 2023, there were
As of March 31, 2024 and 2023, there were
The following table summarizes activity for shares to be issued for the three months periods ending March 31, 2024 and 2023.
| March 31, 2024 | March 31, 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 March 31, 2024 and 2023, respectively | |||||||
Stock Options Plans
The Milestone Scientific Inc., Amended and Restated 2020 Equity Incentive Plan, provides for awards of restricted common, stock restricted stock units, options to purchase and other awards. On June 28, 2023 the plan was amended and restated (the "2020 Plan") the maximum
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. As of March 31, 2024 and 2023, Milestone Scientific recognized approximately $
As of March 31, 2024, there was $
A summary of option activity for employees under the plans and changes three months ended March 31, 2024 is presented below:
| Number of Options | Weighted Averaged Exercise Price $ | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Options Value $ | |||||||||||||
| Options outstanding January 1, 2024 | ||||||||||||||||
| Granted | - | - | - | |||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited or expired | - | - | ||||||||||||||
| Options outstanding March 31, 2024 | - | |||||||||||||||
| Exercisable, March 31, 2024 | - | |||||||||||||||
A summary of option activity for non-employees under the plans and changes during the three months ended March 31, 2024 presented below:
| Number of Options | Weighted Averaged Exercise Price $ | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Options Value $ | |||||||||||||
| Options outstanding January 1, 2024 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited or expired | ( | ) | - | - | ||||||||||||
| Options outstanding March 31, 2024 | ||||||||||||||||
| Exercisable, March 31, 2024 | ||||||||||||||||
For the three months ended March 31, 2024 and 2023, Milestone Scientific recognized approximately $
The information below summarizes the restricted stock award activity for the three months ended March 31, 2024.
| Number of Options | Weighted Averaged Exercise Price $ | |||||||
| Non-vested as of January 1, 2024 | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited or expired | ||||||||
| Non-vested as of March 31, 2024 | ||||||||
As of March 31, 2024, all restricted shares granted and deferred under the terms of employment agreements with each Territory Manager of Milestone Scientific are fully vested. Such shares are expected to be issued to each party upon completion of years of employment. For the three months ended March 31, 2024, and 2023, the Company recognized stock compensation expense of approximately $
As of June 28, 2023, 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
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 base. 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 March 31, | ||||||||
| Sales | ||||||||
| Net Sales: | 2024 | 2023 | ||||||
| Dental | $ | $ | ||||||
| Medical | ||||||||
| Total net sales | $ | $ | ||||||
| Operating Income (Loss): | 2024 | 2023 | ||||||
| Dental | $ | $ | ||||||
| Medical | ( | ) | ( | ) | ||||
| Corporate | ( | ) | ( | ) | ||||
| Total operating loss | $ | ( | ) | $ | ( | ) | ||
| Depreciation and Amortization: | 2024 | 2023 | ||||||
| Dental | $ | $ | ||||||
| Medical | ||||||||
| Corporate | ||||||||
| Total depreciation and amortization | $ | $ | ||||||
| Income (loss) before taxes and equity in earnings of affiliates: | 2024 | 2023 | ||||||
| Dental | $ | $ | ||||||
| Medical | ( | ) | ( | ) | ||||
| Corporate | ( | ) | ( | ) | ||||
| Total loss before taxes and equity in earnings of affiliate | $ | ( | ) | $ | ( | ) | ||
| Total Assets | March 31, 2024 | December 31, 2023 | ||||||
| Dental | $ | $ | ||||||
| Medical | ||||||||
| Corporate | ||||||||
| Total assets | $ | $ | ||||||
| For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | |||||||||||||||||||||||
| Domestic: US | Dental | Medical | Grand Total | Dental | Medical | Grand Total | ||||||||||||||||||
| Instruments | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Handpieces | ||||||||||||||||||||||||
| Accessories | ||||||||||||||||||||||||
| Grand Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| International: Rest of World | ||||||||||||||||||||||||
| Instruments | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Handpieces | ||||||||||||||||||||||||
| Accessories | ||||||||||||||||||||||||
| Grand Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total Product Sales | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
NOTE 9 – CONCENTRATIONS
Milestone Scientific has informal arrangements with third-party U.S. manufacturers of the STA devices, and epidural instruments pursuant to which they manufacture these products under specific purchase orders which contains advance payments for long lead items for production. Advances on contracts have been classified as current at March 31, 2024 and December 31, 2023. The termination of the manufacturing relationship with any of these manufacturers could have a material adverse effect on Milestone Scientific’s ability to produce and sell its products. Although alternate sources of supply exist, and new manufacturing relationships could be established, Milestone Scientific would need to recover its existing tools or have new tools produced. Establishment of new manufacturing relationships could involve significant expense and delay. Any curtailment or interruption of the supply, because of termination of such a relationship, would have a material adverse effect on Milestone Scientific’s financial condition, business, and results of operations.
On January 3, 2023, the Company launched an E-Commerce platform selling and shipping STA Single Tooth Anesthesia System® (STA) and handpieces directly to dental offices and dental groups within the U.S. For the three months ended March 31, 2024, E-Commerce accounted for
The Company had distributors that accounted for
As of March 31, 2024, the Company had suppliers that accounted for
NOTE 10 -- RELATED PARTY TRANSACTIONS
United Systems
Milestone Scientific has a supply agreement with United Systems (whose controlling shareholder, Tom Cheng, is a significant stockholder of Milestone Scientific), the principal manufacturer of our handpieces, pursuant to which manufacture is under specific purchase orders, but without minimum purchase commitments. Purchases from this manufacturer were approximately $
As of March 31, 2024 and December 31, 2023, Milestone Scientific owed this manufacturer approximately $
Director of Clinical Affairs
The Director of Clinical Affairs’ royalty fee was approximately $
Leonard Osser, Director
On March 2, 2021, the Company entered into a Royalty Sharing Agreement with Leonard Osser, pursuant to which Mr. Osser sold, transferred and assigned to the Company all of his rights in and to a certain patent application as to which he is a co-inventor with Mark Hochman, a consultant to the Company, and the Company agreed to pay to Mr. Osser, beginning May 9, 2027, half of the royalty (
As part of the Succession Plan of the Company, Mr. Osser agreed, pursuant to an agreement dated April 6, 2021 (the “Succession Agreement”), to restructure certain of his existing agreements with the Company, which provide for additional and broader executive support, and at such time as he elects to step down as Interim Chief Executive Officer of the Company, to become the Vice Chairman of the Board of the Company.
With respect to Mr. Osser’s July 2017 Employment Agreement and July 2017 Consulting Agreement (each as previously disclosed), the compensation under the Employment Agreement was modified to reduce the overall compensation by $
Compensation under the Employment Agreement and the Consulting Agreement is payable for 9.5 years from May 19, 2021. The Company recorded expenses of $
Dr. D. Demesmin, Director
As of February 2024, the University Pain Medicine Center (STEMMEE), of which Dr. D. Demesmin, a Company board member is the CEO agreed to purchases products from the Company under the same terms and conditions applying to other medical pain clinics in the United States. During the first quarter of 2024, STEMMEE purchased medical products in the amount of $
NOTE 11 — COMMITMENTS
(1) Contract Manufacturing Agreement
Milestone Scientific has informal arrangements with third-party manufacturers of the STA devices, and epidural instruments pursuant to which they manufacture these products under specific purchase orders but without any long-term contract or minimum purchase commitment. The Company has a purchase commitment for the delivery of
(2) Leases
Operating Leases
The Company identified and assessed the following significant assumptions in recognizing its right-of-use assets and corresponding lease liabilities:
| ● | As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company has utilized its incremental borrowing rate based on the long-term borrowing costs of comparable companies in the Medical Device industry. | |
| ● | Since the Company elected to account for each lease component and its associated non-lease components as a single combined lease component, all contract consideration was allocated to the combined lease component. | |
| ● | The expected lease terms include non-cancellable lease periods. Renewal option periods are not included in the determination of the lease terms as they were not reasonably certain to be exercised. |
The components of lease expense were as follows:
| March 31, 2024 | March 31, 2023 | |||||||
| Cash paid for operating lease liabilities | $ | $ | ||||||
| Cash paid for finance lease liabilities | ||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | ||||||||
| Property and equipment obtained in exchange for new finance lease liabilities | ||||||||
| Weighted Average Remaining Lease Term | ||||||||
| Finance leases (years) |
|
| ||||||
| Operating leases (years) |
|
| ||||||
| Weighted-average discount rate – operating leases | % | % | ||||||
| Weighted-average discount rate – finance leases | % | % | ||||||
NOTE 12 — SUBSEQUENT EVENTS
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 $
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussions of the financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements contained in this report and in connection with management's discussion and analysis and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission, or SEC on March 29, 2024. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements, within the meaning of Section 21E of the Exchange Act, that involve risks and uncertainties. The actual results may differ materially from those anticipated in these forward-looking statements.
OVERVIEW
Milestone Scientific is a biomedical technology company that patents, designs, develops and commercializes innovative diagnostic and therapeutic injection technologies and devices for medical and dental use. Since our inception, we have engaged in pioneering proprietary, innovative, computer-controlled injection technologies, and solutions for the medical and dental markets. We believe our technologies are proven and well established. Our common stock was initially listed on the NYSE American on June 1, 2015, and trades under the symbol “MLSS”.
We have focused our resources on redefining the worldwide standard of care for injection techniques by making the experience more comfortable for the patient by reducing the anxiety and stress of receiving injections from the healthcare provider. Our computer-controlled injection devices make injections precise, efficient, and virtually painless.
We have developed a proprietary, revolutionary, computer-controlled anesthetic delivery device, our 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. Our proprietary DPS Dynamic Pressure Sensing technology is our technology platform that advances the development of next-generation devices. It regulates the flow rate and monitors the 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.
Our device, using The Wand®, a single use disposable handpiece, is marketed in dentistry under the trademark CompuDent®, and STA Single Tooth Anesthesia System® and is suitable for all dental procedures that require local anesthetic. The dental devices currently are 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 spine region. In addition, Milestone Scientific has obtained CE mark approval and can be marketed and sold in most European countries.
Our recent receipt of chronology-Specific CPT Code for the Company's technology by the American Medical Association marks an important milestone, that could increase the potential number of anesthesia pain management clinics adopting the CompuFlo instrument. A CPT code expands the potential for reimbursement of epidural procedures in pain management utilizing the CompuFlo Epidural System., which should help accelerate the commercial roll-out of CompuFlo in the U.S
Milestone Scientific and its subsidiaries currently hold over 245 U.S. and foreign patents, and many patents pending and patent applications. The Company’s patents and patent applications relate to drug delivery methodologies, Peripheral Nerve Block, drug flow rate measurement, pressure/force computer-controlled drug delivery with exit pressure, dynamic pressure sensing, automated rate control, automated charging, drug profiles, audible and visual pressure/force feedback, tissue identification, identification of a target region drug delivery injection unit, drug drive unit for anesthetic, handpiece, and injection device.
Milestone Scientific remains focused on advancing efforts to achieve the following three primary objectives:
| ● |
Establishing Milestone’s DPS Dynamic Pressure Sensing technology platform as the standard-of-care in painless and precise drug delivery, providing for the first time, objective visual and audible in-tissue pressure feedback, and continuing to expand platform applications; |
| ● |
Following obtaining successful FDA clearance of our first medical device, Milestone Scientific is transitioning from a research and development organization to a commercially focused medical device company; and |
| ● |
Expanding our global footprint of our CompuFlo Epidural and CathCheck System by utilizing a targeted field sales force and partnering with distribution companies worldwide.
|
Our dental devices have been used to administer over 92 million injections worldwide. Each of our devices has a related single use disposable handpiece, leading to a continuing revenue stream following the sale of the device. At present, we sell disposable handpieces unique to our legacy product (the Wand and CompuDent) to users who have not upgraded to our current dental product, the STA Single Tooth Anesthesia System.
Building on the success of our proprietary, core technology platform for dental injections, and desiring to pursue other growth opportunities, we have begun to expand the uses and applications of our proprietary, patented technologies to achieve greater operational efficiencies, enhanced patient safety and therapeutic adherence, patient satisfaction, and improved quality of care across a broad range of medical specialties.
We intend to continue to expand the uses and applications of our DPS Dynamic Pressure Sensing technology. We believe that we and our technology solutions are recognized by key opinion leaders (i.e., academics, anesthesiologists and practicing dentists whose opinions are widely respected), industry experts and medical and dental practitioners as a leader in the emerging, computer-controlled injection industry.
The Single Tooth Anesthesia System (Dental)
Since its market introduction in early 2007, the STA Single Tooth Anesthesia System and prior C-CLAD devices have been used to deliver over 92 million safe, effective, and comfortable injections. The instrument has also been favorably evaluated in numerous peer-reviewed, published clinical studies and associated articles. Moreover, there appears to be a growing consensus among users that the STA Instrument is proving to be a valuable and beneficial instrument that is positively impacting the practice of dentistry worldwide.
Medical Market Product
In June 2017, we received FDA regulatory clearance to sell the CompuFlo Epidural Computer Controlled Anesthesia System in the United States for epidural injections.
In May, 2022, the Company received a chronology-specific CPT Code for the Company’s technology by the American Medical Association, which marks an important milestone that could increase the potential number of anesthesia pain management clinics adopting the CompuFlo instrument. Effective January 1, 2023, this temporary tracking code allows clinicians to submit claims to healthcare insurance providers using the Company’s technology for Epidural Sterile Injections in the lumbar, thoracic, and cervical thoracic junction of the spinal region for reimbursement. A CPT code expands the potential for reimbursement of epidural procedures in pain management utilizing the CompuFlo Epidural System, which should help accelerate the commercial roll-out of CompuFlo in the United States.
On February 27, 2023, the Company announced that its CompuFlo® Epidural System has received 510(k) FDA clearance for use in the thoracic region of the spine, including the cervical thoracic junction. This approval expands upon the Company’s prior approval of CompuFlo for use within the lumbar region of the spine, where the focus has been epidural analgesia during labor and delivery procedures.
The following table shows a breakdown of Milestone Scientific’s product sales (net), domestically and internationally, by business segment product category:
| For the three months ended March 31, 2024 |
For the three months ended March 31, 2023 | |||||||||||||||||||||||
| Domestic: US |
Dental |
Medical |
Grand Total |
Dental |
Medical |
Grand Total |
||||||||||||||||||
| Instruments |
$ | 213,875 | $ | - | $ | 213,875 | $ | 224,274 | $ | 1,000 | $ | 225,274 | ||||||||||||
| Handpieces |
1,080,433 | 6,000 | 1,086,433 | 1,139,778 | 1,200 | 1,140,978 | ||||||||||||||||||
| Accessories |
16,690 | - | 16,690 | 23,071 | - | 23,071 | ||||||||||||||||||
| Grand Total |
$ | 1,310,998 | $ | 6,000 | $ | 1,316,998 | $ | 1,387,123 | $ | 2,200 | $ | 1,389,323 | ||||||||||||
| International: Rest of World |
||||||||||||||||||||||||
| Instruments |
$ | 282,087 | $ | - | $ | 282,087 | $ | 398,955 | $ | - | $ | 398,955 | ||||||||||||
| Handpieces |
646,948 | 1,420 | 648,368 | 789,116 | 4,000 | 793,116 | ||||||||||||||||||
| Accessories |
1,392 | - | 1,392 | 16,204 | - | 16,204 | ||||||||||||||||||
| Grand Total |
$ | 930,427 | $ | 1,420 | $ | 931,847 | $ | 1,204,275 | $ | 4,000 | $ | 1,208,275 | ||||||||||||
| Total Product Sales |
$ | 2,241,425 | $ | 7,420 | $ | 2,248,845 | $ | 2,591,398 | $ | 6,200 | $ | 2,597,598 | ||||||||||||
Current Product Platform
See Note 1, “Organization and Business”.
Results of Operations
The following table sets forth the consolidated results of operations for the three months ended March 31, 2024 and 2023, respectively. The trends suggested by this table may not be indicative of future operating results:
| For the three months ended March 31, 2024 |
For the three months ended March 31, 2023 |
|||||||
| Operating results: |
||||||||
| 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 | ||||||
| Operating expenses: |
||||||||
| 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 | ) | ||||
| Other income, and interest net |
24,539 | 23,345 | ||||||
| Net loss before income tax |
(1,440,529 | ) | (1,319,331 | ) | ||||
| Provision for income tax |
- | |||||||
| 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 | ) | ||
| Cash flow: |
March 31, 2024 |
March 31, 2023 |
||||||
| Net cash used in operating activities |
$ | (1,218,128 | ) | $ | (2,003,588 | ) | ||
| Net cash provided by (used in) investing activities |
$ | 2,004,463 | $ | (4,431,576 | ) | |||
| Net cash provided by (used in) financing activities |
$ | 241,429 | $ | (2,162 | ) | |||
Three months ended March 31, 2024 compared three months ended March 31, 2023
Net sales for 2024 and 2023 were as follows:
| 2024 |
2023 |
Change |
||||||||||
| Dental |
$ | 2,241,425 | $ | 2,591,398 | $ | (349,973 | ) | |||||
| Medical |
7,420 | 6,200 | $ | 1,220 | ||||||||
| Total sales, net |
$ | 2,248,845 | $ | 2,597,598 | $ | (348,753 | ) | |||||
Consolidated revenue for the three months ended March 31, 2024 and 2023 was approximately $2.2 million and $2.6 million, respectively, a decrease of approximately $349,000. As of January 3, 2023, the Company launched an E-Commerce platform, to replace its previous U.S. distribution arrangement with Henry Schein by selling and shipping the STA Single Tooth Anesthesia System® (STA) and handpieces directly to end users, including dental offices and dental groups, within the U.S. E-commerce and dental service revenue for the three months ended March 31, 2024 was approximately $1.3 million compared $989,000 at March 31, 2023. The Company terminated its remaining U.S. distributor in September, 2023. The Company recorded no revenue from other U.S. distributors for the three months ended March 31, 2024 compared to approximately $219,000 for the three months ended March 31, 2023. For the three months ended March 31, 2024, international revenue was approximately $930,000 a decrease of $274,000, compared to March 31, 2023.
Gross Profit for 2024 and 2023 were as follows:
| 2024 |
2023 |
Change |
||||||||||
| Dental |
$ | 1,673,129 | $ | 1,889,256 | $ | (216,127 | ) | |||||
| Medical |
2,974 | 207 | $ | 2,767 | ||||||||
| Total gross profit |
$ | 1,676,103 | $ | 1,889,463 | $ | (213,360 | ) | |||||
Consolidated gross profit for the three months ended March 31, 2024 was approximately $1.7 million, a decrease of approximately $213,000, compared to approximately $1.9 million for the same period in 2023.
Selling, general and administrative expenses for 2024 and 2023 were as follows:
| 2024 |
2023 |
Change |
||||||||||
| Dental |
$ | 953,668 | $ | 1,117,405 | $ | (163,737 | ) | |||||
| Medical |
494,142 | 809,568 | (315,426 | ) | ||||||||
| Corporate |
1,587,466 | 1,147,599 | 439,867 | |||||||||
| Total selling, general and administrative expenses |
$ | 3,035,276 | $ | 3,074,572 | $ | (39,296 | ) | |||||
Consolidated selling, general and administrative expenses for the three months ended March 31, 2024 and 2023 were approximately $3.0 million and $3.1 million, respectively. The decrease of approximately $39,000 is due to factors in several areas. Employee salaries and benefits expenses decreased approximately $274,000 for the three months ended March 31, 2024 compared to the same period in 2023. The Company decreased marketing, warehousing, travel, and royalties expenses by approximately by $174,000 The Company recorded an increase in professional fees quality control, regulatory, other selling, general and administrative expenses of approximately $408,000 for the three months ended March 31, 2024 compared to the same period in 2023.
Research and Development for 2024 and 2023 were as follows:
| 2024 |
2023 |
Change |
||||||||||
| Dental |
$ | 93,952 | $ | 128,743 | $ | (34,791 | ) | |||||
| Medical |
259 | 11,604 | (11,345 | ) | ||||||||
| Corporate |
- | - | - | |||||||||
| Total research and development |
$ | 94,211 | $ | 140,347 | $ | (46,136 | ) | |||||
Consolidated research and development expenses for the three months ended March 31, 2024 and 2023 were approximately $94,000 and $140,000, respectively. The decrease of approximately $46,000 is related to the Company's entering into the final stage of the development of the next generation STA Single Tooth Anesthesia System.
Profit (Loss) from Operations for 2024 and 2023 were as follows:
| 2024 |
2023 |
Change |
||||||||||
| Dental |
$ | 625,510 | $ | 641,940 | $ | (16,430 | ) | |||||
| Medical |
(491,428 | ) | (821,933 | ) | 330,505 | |||||||
| Corporate |
(1,599,150 | ) | (1,162,683 | ) | (436,467 | ) | ||||||
| Total loss from operations |
$ | (1,465,068 | ) | $ | (1,342,676 | ) | $ | (122,392 | ) | |||
The loss from operations was approximately $1.5 million and $1.3 million for the three months ended March 31, 2024 and 2023, respectively, a decrease of approximately $0.1 million.
Liquidity and Capital Resources
Cash Flows
The following table summarizes our sources and uses of cash for three months ended:
| Cash flow: |
March 31, 2024 |
March 31, 2023 |
Change |
|||||||||
| Net cash used in operating activities |
$ | (1,218,128 | ) | $ | (2,003,588 | ) | $ | 785,460 | ||||
| Net cash provided by (used in) investing activities |
2,004,463 | (4,431,576 | ) | 6,436,039 | ||||||||
| Net cash provided by (used in) financing activities |
241,429 | (2,162 | ) | 243,591 | ||||||||
| $ | 1,027,764 | $ | (6,437,326 | ) | $ | 7,465,090 | ||||||
Operating Activities
Cash flows used in operating activities decreased $0.8 million for the three months ended March 31, 2024 compared to March 31, 2023. The decrease was driven by an increase in accounts payable, prepaid expenses offset by decrease in accounts receivable, and accrued expense.
Investing Activities
Cash flows used in investing activities decreased $6.4 million for the three months ended March 31, 2024 compared to March 31, 2023. The decrease in cash used in investing activities was driven by the Company’s purchase of $4.5 million of marketable securities during the three months ended March 31, 2023. The Company sold $2.0 million of marketable securities during the three months ended March 31, 2024 which increased cash and equivalents $2.0 million.
Financing Activities
Cash flows provided by financing activities increase $0.2 million for the three months ended March 31, 2024 compared March 31, 2023 due to the issuance of additional shares of the Company’s common stock due to a Public Placement Offering.
Consideration of Company’s ability to continue as a going concern.
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”). 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.
On April 8, 2024, the Company completed the net sale of $1.9 million worth of NOLs via the NJ NOL Program.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Milestone Scientific is a “smaller reporting company” as defined by Regulation S-K and, as such, is not required to provide the information required by this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Principal Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Principal Accounting Officer, concluded that, as of March 31, 2024, our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
We routinely review our internal control over financial reporting and from time to time make changes intended to enhance the effectiveness of our internal control over financial reporting. During the three months ended March 31, 2024, we made no changes to our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that we believe materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in Part I, Item 1A, of our 2023 Annual Report.
Item1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
None.
Item 2. Unregistered Sales of Equity Securities and use of proceeds
Not applicable.
Item 3. Default upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
applicable.
Item 6. Exhibits and Financial Statement Schedules
| Exhibit No |
Description |
|
| 31.1 |
Rule 13a-14(a) Certification-Chief Executive Officer and Chief Accounting Officer* |
|
| 32.1 |
Section 1350 Certifications-Chief Executive Officer and Chief Accounting Officer** |
|
| 101.INS |
Inline XBRL Instance Document* |
|
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document* |
|
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document* |
|
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document* |
|
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document* |
|
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document* |
|
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * |
Filed herewith. |
| ** |
Furnished herewith and not filed, in accordance with item 601(32) (ii) of Regulation S-K. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MILESTONE SCIENTIFIC INC. |
|||
| /s/ Arjan Haverhals |
|||
| Arjan Haverhals |
|||
| Chief Executive Officer |
|||
| Chief Accounting Officer | |||
| Principal Executive Officer | |||
| Date: May 15, 2024 |