Organization, Business and Basis of Presentation

3 Months Ended

Mar. 31, 2014

Organization, Business and Basis of Presentation

ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION

Milestone Scientific Inc. (“Milestone”) or (“our”) was incorporated in the State of Delaware in August 1989.

The unaudited financial statements of Milestone have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

These unaudited financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2013 included in Milestone’s Annual Report on Form 10-K.

In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring entries) necessary to fairly present Milestone’s financial position as of March 31, 2014 and the results of its operations for the three months then ended.

The results reported for the three months ended March 31, 2014 are not necessarily indicative of the results of operations which may be expected for a full year.

Milestone has incurred significant operating losses since its inception. Milestone has positive cash flows from operating activities for the three months ending March 31, 2014 of $276,968 and a negative cash flow of $83,667 for the three months ended March 31, 2013. At March 31, 2014, Milestone had cash and cash equivalents of $1,398,847 and a positive working capital of $4,162,674. The working capital increased by $1,818,540 as compared to December 31, 2013. The positive change in working capital is due to Milestone’s increased profitability and net cash flow resulting in an increase in current assets (cash, accounts receivable and classification of advances on contracts from noncurrent to current) and a reduction in accounts payable. Milestone is actively pursuing the generation of positive cash flows from operating activities through an increase in revenue based upon management’s assessment of present contracts and current negotiations and reductions in operating expenses. As of March 31, 2014, Milestone does not expect to have sufficient cash reserves to meet all of its anticipated obligations for the next twelve months. Milestone may require the need for a higher level of marketing and sales efforts that at present it cannot fund. If Milestone is unable to continue to generate positive cash flows from its operating activities it will need to raise additional capital. There is no assurance that Milestone will be able to continue to generate positive operating cash flows or that additional capital can be raised on terms and conditions satisfactory to Milestone, if at all. If positive cash flow cannot be continued to be achieved or if additional capital is required and it cannot be raised, then Milestone would be forced to curtail its development activities, reduce marketing expenses for existing dental products or adopt other cost saving measures, any of which might negatively affect Milestone’s operating results.

Milestone’s historical, and the matters discussed above, raise substantial doubt about its ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.