ITEM 7. 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 included elsewhere in this annual report. 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. See "Risk Factors" elsewhere in this Form 10-K.

OVERVIEW

Our common stock was listed on the NYSE American on June 1, 2015 and trades under the symbol “MLSS”. We have developed a proprietary, computer-controlled anesthetic delivery instrument, using The Wand, a single use disposable handpiece. The instrument is marketed in dentistry under the trademark CompuDent®, and STA Single Tooth Anesthesia System and in medicine under the trademark CompuMed. CompuDent is suitable for all dental procedures that require local anesthetic. CompuMed is suitable for many medical procedures regularly performed in plastic surgery, hair restoration surgery, podiatry, colorectal surgery, dermatology, orthopedics, and several other disciplines. The dental instruments are sold in the United States, US territories, Canada, and in over 58 other countries abroad. In June 2017, the FDA approved our 510(k) applications for marketing clearance in the United States of our CompuFlo Epidural System. We are in the process of introductory meetings with medical device distributors within the United States and Europe. There have been 27 medical instruments sold in the United States through December 2020, and limited amounts sold internationally as of the reporting date. Certain of our medical instruments have obtained European CE mark approval and can be marketed and sold in most European countries.

Milestone Scientific remains focused on advancing efforts to achieve the following four primary objectives:

Wand STA Dental Instrument Growth

Since its market introduction in early 2007, the Wand/STA Instrument and prior C-CLAD products have been used to deliver over 66 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.

Global Distribution Network

Beginning January 1, 2016, Milestone Scientific entered into a non-exclusive distribution agreement with Henry Schein, Inc. (“Henry Schein”). In June 2016, that agreement was replaced with an exclusive distribution arrangement for our dental products for the United States and Canada with Henry Schein. Under this arrangement we have a semi-dedicated independent sales force visiting dentists.

In December 2020, the Henry Schein Exclusive Distribution Agreement was replaced with a non-exclusive distribution agreement in the USA and Canada. Beginning in January 2021, the Company began enrollment of new dental non-exclusive regional distributors throughout the USA and Canada. As of this report date the Company has signed non-exclusive distributor agreements with eight regional dental distributors.

On the global front, we have granted exclusive marketing and distribution rights for the Wand/STA Instrument to select dental suppliers in various international regions in Asia, Africa, South America, and Europe. They include FM Produkty Dla Stomatologii in Poland and Unident AB in the countries of Denmark, Sweden, Norway, and Iceland.

The following table shows a breakdown of Milestone Scientific’s product sales (net), domestically and internationally, by business segment product category:

Domestic: US Dental Medical Grand Total

International: Rest of World Dental Medical Grand Total

International: China Dental Medical Grand Total

Handpieces - - -

Domestic: US/Canada Dental Medical Grand Total

International: Rest of World Dental Medical Grand Total

International: China Dental Medical Grand Total

Accessories - - -

Current Product Platform

See Item 1. Description of Business.

Summary of Critical Accounting Policies and Significant Judgments andEstimates

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, Milestone Scientific evaluates its estimates, including those related to accounts receivable, inventories, stock-based compensation, and contingencies. Milestone Scientific bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not clear from other sources. Actual results may differ from those estimates under different assumptions or conditions.

While significant accounting policies are more fully described in Note C to the consolidated financial statements included elsewhere in this report, Milestone Scientific believes that the following accounting policies and significant judgment and estimates are most critical in understanding and evaluating the reported financial results.

Principles of Consolidation

Milestone Scientific's discussion and analysis of the financial condition and results of operations is based upon its consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and include the accounts of its wholly-owned and majority-owned subsidiaries including, Wand Dental, Milestone Advanced Cosmetic and Milestone Medical. All significant, intra-entity transactions and balances are eliminated in the consolidation.

Variable Interest Entities

A variable interest entity ("VIE") is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both the power to direct the activities that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE.

Because Milestone Scientific has a variable interest in Milestone China it considered the guidance in ASC 810, “Consolidation” as it relates to determining whether Milestone China is a VIE and, if so, identifying the primary beneficiary. Milestone Scientific would be considered the primary beneficiary of the VIE if it has both of the following characteristics:

In first quarter 2020, Milestone China and certain marketing affiliates entered into a plan to merge (the Transaction) into an affiliated manufacturing company, Anhui Maishida Medical Technology, Co. Ltd. (Anhui). Anhui will be the surviving entity after the merger and will have complete responsibility for sales, marketing, and distribution for the Company’s dental products in China. However, as of the filing date of this Quarterly Report, due to the COVID-19 Pandemic, the regulatory documentation for the planned merger has been placed in suspense since applicable government offices are still closed in China and Hong Kong. After completion of the Transaction, Milestone Scientific is expected to have an approximate 28.4% direct ownership in Anhui. Milestone China and certain marketing affiliates are expected to be dissolved upon completion of the merger and upon the required regulatory filings in China and Hong Kong.

Milestone Scientific does not have the ability to control the activities that most significantly impact Milestone China's economics and, therefore, the power criterion has not been met. Management placed the most weight on the relationship and significance of activities of Milestone China to the CEO and a group of significant shareholders, including the Milestone China CEO, who has the power to direct the activities that most significantly impact the economic performance of Milestone China. Management has concluded that Milestone Scientific is not the primary beneficiary under ASC 810. Accordingly, Milestone China has not been consolidated into the financial statements of Milestone Scientific and continues to be accounted for under the equity method. See Note F.

Assessment of our Ability to Continue as a Going Concern

In accordance with Accounting Standard Codification (“ASC”) 205-40, “Presentation of Financial Statements – Going Concern”, the Company continually evaluates 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. Milestone Scientific has incurred operating losses and negative cash flows from operating activities in virtually each year since its inception.

In the second quarter of 2020, the Company was successful in raising approximately $19.7 million in public offerings. Based on the expected cash needed for operating activities, 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 of this annual report.

Other Uncertainties

The coronavirus (COVID-19) that was reported to have surfaced in Wuhan, China in December 2019 and that has now spread to other countries throughout the world has adversely impact our operations and those of our third-party partners. As a result of the reduced hours and closings of dental offices throughout the country and the rest of the world due to the continuing spread of COVID-19, revenues for the year ended December 31, 2020 was adversely affected.

There has been a slow pick up in dental instrument and disposable sell through to dentists beginning in the third quarter. In addition, it is uncertain as to what the effect will be on the anticipated commercialization of our CompuFlo Epidural and CathCheck system as a medical device . The extent to which the coronavirus impacts our operations, our third-party partners, the dental offices and hospital operations and demand depends on future developments which are still highly uncertain. Such future developments could have a material adverse effect on our financial results and our ability to conduct business as expected.

Accounts Receivable

Milestone Scientific sells a significant amount of its products on credit terms to its major distributors. Milestone Scientific estimates losses from the ability or inability of its customers to make payments on amounts billed. Most of credit sales are due within ninety days from invoicing.

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 and obsolete inventory is recorded if required based on past and expected future sales, potential technological obsolescence and product expiration requirement and regulations.

Impairment of Long-Lived Assets

Milestone Scientific reviews long-lived assets for impairment whenever events or circumstances (i.e. a triggering event) indicate that the carrying amounts may not be recoverable.

The Company’s impairment review process is based upon an estimate of future undiscounted cash flow. Factors the Company considers that could trigger an impairment review include the following:

• significant negative industry or economic trends, and

• significant technological changes, which would render the technology obsolete

Recoverability of assets that will continue to be used in the Company's operations is measured by comparing the carrying value to the future net undiscounted cash flows expected to be generated by the asset or asset group. Future undiscounted cash flows include estimates of future revenues, driven by market growth rates, and estimated future costs.

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;

The Company derives its revenues from the sale of its products, primarily dental instruments, handpieces, and other related products. The Company sells its products through a global distribution network and 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. For certain arrangements where the shipping terms are FOB destination, revenue is recognized upon delivery. 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.

Results of Operations.

The following table sets forth the consolidated results of operations for the year ended December 31, 2020 compared to 2019 . The trends suggested by this table may not be indicative of future operating results:

Operating results:

Operating expenses:

Change in fair value of derivative liability - (3,635,580 )

Net loss attributable to noncontrolling interests (51,539 ) (55,872 )

Net loss attributable to Milestone Scientific Inc. $ (7,337,273 ) $ (7,524,368 )

Net cash used in investing activities (21,438 ) (9,916 )

Year ended December 31, 2020 compared to year ended December 31, 2019.

Net sales for 2020 and 2019 were as follows:

Consolidated revenue for the twelve months ended December 31, 2020 and 2019 were approximately $5.4 million and $8.3 million, respectively. Dental revenue for the twelve months ended December 31, 2020 and 2019 were approximately $5.4 million and $8.4 million, respectively. Dental revenues decreased by approximately $2.9 million, which is related to COVID-19 pandemic affecting the Company’s customers and other business partners. As a result of the reduced hours and closings of dental offices throughout the country and the rest of the world due to the continuing spread of COVID-19, our revenue for the year ending December 31,2020 was materially and adversely affected. In December 2020, the Exclusive Distribution Arrangement with Henry Schein was replaced with a non-exclusive distribution arrangement. Under the non-exclusive arrangement, Henry Schein will purchase dental instruments and handpieces in the United States and Canada. Beginning in January 2021, the Company began a process of signing non-exclusive dental distribution arrangements with dental distributors in specific geographical locations in the United States and Canada. To date there are eight (8) new non-exclusive dental distributors engaged in the USA and Canada. The goal is to add additional non-exclusive distributors in three main cities in the USA. The goal of changing our marketing plan from a sole exclusive distributor in the USA and Canada, to a large number of non-exclusive distributors is to increase placement of our Wand/STA instrument and thus the expansion of our dental disposables.

Medical revenue for the twelve months ended December 31, 2020 and 2019, were approximately $16,000 and $38,000, respectively. In June 2017, the Company announced that the CompuFlo Epidural System received 510(k) marketing clearances from the U.S. Food and Drug Administration (FDA). Milestone is in the process of attending virtual medical device trade shows and attending introductory meetings with medical facilities and medical device distributors within the United States and European markets. The Company is focusing the marketing its Epidural devices principally in the United States. In 2020, the Company began to build an internal sales force to market the Epidural devices to hospitals and medical center throughout the United States. The 2020 COVID - 19 Pandemic has substantially reduced access to many medical facilities for further research projects and as such, trade shows were cancelled through 2020. The Company is now in the process of re-energizing its direct sales efforts with select hospitals and end user meetings as the Pandemic surge has slowed in the USA. The Company’s focus will be on marketing the Epidural medical instruments in the United States.

Gross Profit for 2020 and 2019 were as follows:

Consolidated gross profit for the twelve months ended December 31, 2020 and 2019 were approximately 67% and 68%, respectively.

Selling, general and administrative expenses for 2020 and 2019 were as follows:

Consolidated selling, general and administrative expenses for the twelve months ended December 31, 2020 and 2019 were approximately $10.7 million and $9.5 million, respectively. This increase of approximately $1.2 million is categorized in several areas. Employee salaries, and benefits expenses increased approximately $1.0 million for twelve months s ended December 31, 2020, as the Company hired additional employees to work on the commercialization of the CompuFlo® Epidural System. During the twelve months ended December 31, 2020 D&O insurance increased approximately $169,000 due to the increase of premiums. The Company expensed approximately $370,000 of bad debt related to a settlement with United Systems, see Note F. Office expense increased approximately $143,000 for the relocation of the Company's office and other related costs. Due to Covid-19 Pandemic, the Company's travel expenses, marketing, trade shows, quality control, and general expenses decreased approximately $560,000 while professional and consulting expense increased approximately $75,000.

Research and Development for 2020 and 2019 were as follows:

Dental $ - $ - $ - 0 %

Consolidated research and development expenses for the twelve months ended December 31, 2020 and 2019, were approximately $308,000 and $190,000, respectively. The increase approximately $118,000 is associated with the Company developing software upgrades and enhancement for the CompuFlo® Epidural System and handpieces.

Profit (Loss) from Operations for 2020 and 2019 were as follows:

The loss from operations was approximately $7.4 million and $4.0 million for the twelve months ended December 31, 2020 and 2019, respectively, an increase of $3.4 million. The increase is the result of decreased dental revenue, due to reduced hours and closings of dental and medical offices throughout the country and the rest of the world due to the continuing spread of COVID-19.

Change in Derivative Liability

In 2019, the Company incurred a non-cash expense of approximately $3.65 million due to the shares and warrants issued in the public and private offerings as well as other issuance of common stock during 2019 for which the Company did not have a sufficient number of authorized shares of common stock to cover the exercise and issuance of approximately 5,850,000 outstanding equity instruments. All warrants issued in the public and private placements during 2019 and 2016, all shares-to-be-issued, and certain employee options were classified as liabilities during part of year ended December 31, 2019. The Company received shareholder approval to increase the number of authorized shares of common stock on December 17, 2019. At that time, the Company extinguished the liability for insufficient number of authorized shares of common stock. At December 31, 2019, all outstanding warrants, shares to be issued and options are not classified as a liability.

Liquidity and Capital Resources

Milestone Scientific has incurred annual operating losses and negative cash flows from operating activities since its inception. Milestone Scientific is actively pursuing the generation of positive cash flows from operating activities through an increase in revenue from its dental business and the medical business worldwide, and a reduction in operating expenses.

In the second quarter of 2020 the Company completed two capital raises. In April 2020, the Company completed a Common Stock Offering generating gross proceeds of approximately $5.1 million (5,420,000 common shares and 2,710,000 warrants). The combined price of the shares and warrants was $0.95 per share. The warrants are exercisable at a price of $1.20 per share and have an expiration of three years from the issue date. In June 2020, the Company completed a second Common Stock Offering generating gross proceeds of approximately $14.6 million (6,770,000 common shares and 3,749,000 warrants). The combined price of shares and warrants of was $2.15 per share. The warrants are exercisable at a of $2.60 and expire three years from the issue date. See Note I. With the combination of these two Common Stock Offerings, the Company has sufficient liquidity to support operations for at least a year after the consolidated financial statements issue date.

Management believes that the Company has sufficient cash, along with the current cash flow and support from the dental business to mitigate the expected selling expenditures for commercialization of the Epidural medical device, as well as other operating expenditures and planned new product development programs, over the next twelve months from the filing date of this report. Dental offices in the USA and world-wide are in the process of reopening to near pre Covid-19 volumes. For the medical sector, hospitals in the USA are opening for elective procedures and as such we ae looking for new and innovative medical solutions. The positive movement in the hospitals will be a benefit step to our sales efforts for the Epidural instrument.

Off-Balance Sheet Arrangements

Milestone Scientific does not have any off-balance sheet arrangements that are currently material or reasonably likely to be material to the financial position or results of operations.

Contractual Obligations

The impact of the consolidated contractual obligations at December 31, 2020 , expected on the liquidity and cash flows in future periods, is as follows:

Payments Due by Period

Total Less than 1 Year 1-3 Years 3-5 Years

(1) Purchase obligations include agreements for the purchase of dental and medical devices, including purchase obligations entered into post year end, which will require payment in during the year ended 2021.

Recent Accounting Pronouncements

See “Note C - Summary of Significant Accounting Policies” to the consolidated financial statements for explanation of recent accounting pronouncements impacting Milestone Scientific.

Item 7A. 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 8. Financial Statements

The financial statements of Milestone Scientific required by this Item are set forth beginning on page F-1.

Item 9. Change in and Disagreements with Accountants on Accounting andFinancial Disclosure

None.

Item 9A. Controls and Procedures

Milestone Scientific’s Interim Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of Milestone Scientific’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, Milestone Scientific’s Interim Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures as of December 31, 2020 are effective to ensure that information required to be disclosed in the reports Milestone Scientific 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 and that such information is accumulated and communicated to Milestone Scientific's management, including the Interim Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Milestone Scientific management is responsible for establishing and maintaining internal controls over financial reporting. The internal controls over financial reporting includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control instruments, no matter how well designed, have inherent limitations. Therefore, even those instruments determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Milestone Scientific management assessed the effectiveness of its internal control over financial reporting as of December 31, 2020. In making this assessment, management used the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) adopted in 2013. Based on the assessment and the criteria set forth by COSO, management believes that Milestone Scientific maintained effective internal control over financial reporting as of December 31, 2020. There have been no changes in Milestone Scientific’s internal control over financial reporting identified in connection with the evaluation that occurred during Milestone Scientific’s last fiscal quarter ended December 31, 2020 that have materially affected, or that are reasonably likely to materially affect, Milestone Scientific’s internal controls over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers, Promoters, Control Persons and CorporateGovernance; Compliance with Section 16 (a) of the Exchange Act.

Milestone Scientific’s directors are elected annually by the stockholders and serve for one-year terms until his/her successor is elected and qualified or until such director’s earlier death, resignation, or removal. The executive officers and key personnel are appointed by and serve at the discretion of the Board of Directors The current executive officers and directors of Milestone Scientific and their respective ages, as of March 29, 2021 are as follows:

NAME AGE POSITION DIRECTOR SINCE

Leslie Bernhard (1) (2) (3) 76 Chairman of the Board 2003

Leonard Osser 73 Interim Chief Executive Officer and Director 1991

Jan Adriaan (Arjan ) Haverhals 59 President

Joseph D'Agostino 69 Chief Financial Officer and Chief Operating Officer

Gian Domenico Trombetta 60 Director 2014

1. Member of the Audit Committee

2. Member of the Compensation Committee

3. Member of the Nominating and Corporate Governance Committee

The following are the names of individuals who are not executive officers of Milestone Scientific but are deemed key personnel of Milestone Scientific, their respective ages and positions as of March 29, 2021 .

NAME AGE POSITION

Eugene Casagrande, D.D.S. 76 Director of International Professional Relations

Mark Hochman, D.D.S. 61 Director of Clinical Affairs

Leonard Osser, Interim Chief Executive Officer and Director

Leonard Osser has been Interim Chief Executive Officer since December 2017. From July 2017 to December 2017, he had been Managing Director –China Operations. Prior to that, he served as Milestone Scientific’s Chairman from 1991 until September 2009, and during that time, from 1991 until 2007, was also Chief Executive Officer of Milestone Scientific. In September 2009, he resigned as Chairman of Milestone Scientific, but remained director, and assumed the position of Chief Executive Officer. From 1980 until the consummation of Milestone Scientific’s public offering in November 1995, Mr. Osser was primarily engaged as the principal owner and Chief Executive Officer of U.S. Asian Consulting Group, Inc., a New Jersey-based provider of consulting services specializing in distressed or turnaround situations in both the public and private markets. Mr. Osser’s knowledge of our business and background with us since 1980 provides the Board with valuable leadership skills and insight into our business and accordingly, the expertise needed to serve as one of our directors.

Jan Adriaan (Arjan) Haverhals , President

Mr. Haverhals has been Milestone Scientific's President since September 2020 and as the President and Chief Executive Officer of Milestone Scientific’s Dental Division (Wand Dental Inc.) since June 2020. He brings more than 30 years of sales, marketing, product development, and international expansion experience within the medical device, pharmaceutical, and other industries. Prior to joining Wand Dental and Milestone Scientific, Mr. Haverhals was senior vice president of sales at Xcentric Mold & Engineering from 2019 until 2020 where he was instrumental in increasing sales productivity and efficiency for the company's prototype injection molding services, which included leading healthcare company clients. From 2012 until 2018, Mr. Haverhals worked at Straumann, LLC, a global leader in manufacturing medical and dental devices, where he held a series of senior sales and marketing roles including vice president of customer marketing & education, where he oversaw all product franchises and led the launch of more than 30 products in the North American market. He also served as senior vice president for the Nordic Region at Straumann AB, senior vice president of global sales digital solutions, which included oversight of the strategic acquisition of Etkon; and served as vice president of the Prosthetics Business Unit, where he introduced a new implant and prosthetics product line within a new market segment.

He also served as senior vice president for the Nordic Region at Straumann AB, senior vice president of global sales digital solutions, which included oversight of the strategic acquisition of Etkon; and served as vice president of the Prosthetics Business Unit, where he introduced a new implant and prosthetics product line within a new market segment. He also served as vice president of global marketing & sales at Elkem AS, one of Norway's largest industrial companies. Previously, Mr. Haverhals served as executive vice president of marketing & sales at Cresco Ti Systems Sàrl, a global dental implant company, where he was responsible for turning around and managing global sales, marketing, international business. Mr. Haverhals holds an MS in Pharmacy from the University of Leyden in the Netherlands.

Joseph D’Agostino, Chief Financial Officer and Chief Operating Officer

Joseph D'Agostino has been Milestone Scientific's Chief Financial Officer since October 2008 and Chief Operating Officer since September 2011. Mr. D'Agostino joined Milestone Scientific in January 2008 as Acting CFO and has over 25 years of finance and accounting experience serving both publicly and privately held companies. A results-oriented and decisive leader, he has specific proven expertise in treasury and cash management, strategic planning, information technology, internal controls, Sarbanes-Oxley compliance, operations, and financial and tax accounting. Mr. D'Agostino served as Senior Vice President and Treasurer of Summit Global Logistics, a publicly traded, full service international freight forwarder and customs broker with operations in the United States and China.

Previous executive posts also included Executive Vice President and CFO of Haynes Security, Inc., a leading electronic and manned security solutions company serving government agencies and commercial enterprises; Executive Vice President of Finance and Administration for Casio, Inc., the U.S. subsidiary of Casio Computer Co., Ltd., a leading manufacturer of consumer electronics with subsidiaries throughout the world; and Manager of Accounting and Auditing for Main Hurdman's National Office in New York City (merged into KPMG). Mr. D'Agostino is a Certified Public Accountant and holds memberships in the American Institute of CPA's, New Jersey Society of CPA's, Financial Executive Institute, He is a graduate of William Paterson University where he earned a Bachelor of Arts degree in Science.

Leslie Bernhard, Chairman of the Board

Leslie Bernhard has served as Milestone Scientific’s Chairman of the Board since October 2009 and served as Interim Chief Executive Officer from October 2017 to December 2017. In addition, Ms. Bernhard has also had been serving as an independent director of Milestone Scientific since May 2003. Since 2017, Ms. Bernhard has been an independent director of Sachem Capital Corp a Connecticut based real-estate investment trust. From 2007, Ms. Bernhard served as an independent director of Universal Power Group, Inc., a global supplier of power solutions until it became a private company in 2018. In 1986 she co-founded AdStar, Inc., an electronic ad intake service to the newspaper industry, and served as its president, chief executive officer and executive director until 2012. Ms. Bernhard holds a BS Degree in Education from St. John’s University. Ms. Bernhard’s professional experience and background with AdStar and with us, as one of our directors since 2003, have given her the expertise needed to serve as Chairman of the Board, and Chairman of the Audit Committee.

Gian Domenico Trombetta, Director

Gian Domenico Trombetta has been a director of Milestone Scientific in May 2014 and served as the President and Chief Executive Officer of Milestone Scientific’s Dental Division (Wand Dental Inc.) from October 2014 until May 2020. He founded Innovest S.p.A in 1993, a special situation firm acting in development and distressed capital investments. He has been its President and Chief Executive Officer since its inception. He served as the Chief Executive Officer or a board member of several private commercial companies in different industries including both industrial (e.g. IT, media, web, and fashion) and holding companies. Before founding Innovest, Mr. Trombetta was Project Manager for Booz Allen & Hamilton Inc., a management consulting firm from 1988 to 1992. Mr. Trombetta holds a degree in business administration from the Luiss University in Rome, Italy, and an MBA degree from INSEAD-Fontainbleau-France. Mr. Trombetta business background and experience has given him the expertise needed to serve as one of our directors.

Leonard M. Schiller, Director

Leonard Schiller has been a director of Milestone Scientific since April 1997. Mr. Schiller has been a partner in the Chicago law firm of Schiller Law P.C. and it's predecessors since 1977 and since 2002, its President. Mr. Schiller also serves as a director on the board of Creatd, Inc., a Nasdaq listed social media company since February 2016. He also is a general partner of Gravitas Capital LP, a hedge fund. Mr. Schiller’s professional experience and background have given him the expertise needed to serve as Chairman of the Compensation Committee and as one of our directors.

Neal Goldman

Mr. Goldman is the President and Founder of Goldman Capital Management, Inc., a family office since 2018, which was previously an investment advisory firm founded in 1985. He was First Vice President of Research at Shearson Lehman Hutton. He has also held senior positions as a money manager and research analyst with a variety of firms including Neuberger Berman, Moseley Hallgarten Estabrook and Weeden, Bruns Nordeman, and Russ and Company. Mr. Goldman serves as Chairman of Charles & Colvard, Ltd. (Nasdaq: CTHR) since 2016 and serves on the board of Imageware Systems, Inc. (Nasdaq: IWSY). He also serves on the board of Deep-Down Inc. (DPDW). Prior to their acquisition, he served on the boards of Blyth Industries and IPASS Corporation. Mr. Goldman is a Chartered Financial Analyst (CFA). He also serves on numerous non-profit boards. Mr. Goldman received his B.A. degree in Economics from The City University of New York (City College).

Michael McGeehan

Michael McGeehan has been a director of Milestone Scientific since October 2017. Mr. McGeehan is a business consultant with 30 years of experience in a variety of business domains, including financial services, medical and healthcare products, consumer package goods and the software technology industry. Mr. McGeehan started his career at Metaphor Computer Systems in 1988 and then went to work at Microsoft Corporation in 1991. In 1995, Mr. McGeehan left Microsoft and founded Forefront Information Strategies, an information technology consulting firm. In 2002, Mr. McGeehan returned to Microsoft where he worked until 2017, when he returned to and re-started Forefront. Mr. McGeehan professional experience and background have given him the expertise needed to serve as Chairman of the Corporate Governance and Nominating Committee and as one of our directors.

Mr. McGeehan was on the Board of Directors of Wand Dental Inc., (subsidiary of Milestone Scientific) a maker of a painless, anesthetic injection system for dentists. Mr. McGeehan has a Master’s in Business Administration from Pace University and a Bachelor of Science in Electrical Engineering and Computer Science from Marquette University. Mr. McGeehan background has given him the experience needed to serve as one of our directors.

Mark Hochman, D.D.S., Director of Clinical Affairs

Mark Hochman, D.D.S. has served as Milestone Scientific’s Director of Clinical Affairs and Director of Research and Development since 1999. He has a Doctor of Dental Surgery with advanced training in the specialties of Periodontics and Orthodontics from New York University of Dentistry and has been practicing dentistry since 1984. He is a former clinical associate professor at NYU School of Dental Surgery. Recognized as a world authority on Advanced Drug Delivery Instruments, Dr. Hochman has published numerous articles in this area, and shares in the responsibility for inventing much of the technology currently available from Milestone Scientific.

Dr. Eugene Casagrande, Director of International & Professional Relations

Since 1998, Eugene Casagrande, D.D.S. has served as Director of International and Professional Relations, charged with pursuing a broad range of clinical and industry-related strategic business opportunities for Milestone Scientific. Dr. Eugene R. Casagrande has practiced Cosmetic and Restorative Dentistry for over 30 years in Los Angeles. He is past president of the California State Board of Dentistry and the Los Angeles Dental Society and is a Fellow of the American and International Colleges of Dentists. Dr. Casagrande was a member of the faculty of the University of Southern California, School of Dentistry. He was also the Executive Director of the Los Angeles Oral Health Foundation and the Program Director of the Los Angeles Pediatric Oral Health Access Program. As the Director of International & Professional Relations for Milestone Scientific for over 20 years, he has published multiple articles and has lectured both nationally and internationally at over 100 dental schools and in over 50 countries on Computer-Controlled Local Anesthesia.

Director Independence and Committees of the Board

The Board has determined that Leslie Bernhard, Leonard M. Schiller, Neal Goldman, and Michael McGeehan (the “Independent Directors”) are independent as that term is defined in the listing standards of the NYSE American. As disclosed above, Leslie Bernhard, Leonard M. Schiller, and Michael McGeehan are members of the Audit Committee and are independent for such purposes. Leslie Bernhard, Leonard M. Schiller, and Neal Goldman are members of the Compensation Committee and are independent for such purposes.

Milestone Scientific’s Board of Directors has established a compensation, audit, nominating and corporate governance committees (respectively, “Compensation Committee,” “Audit Committee,” and “Nominating Committee”.) The Compensation Committee reviews and recommends to the Board of Directors the compensation and benefits of all the officers of Milestone Scientific, reviews general policy matters relating to compensation and benefits of employees of Milestone Scientific and administers the issuance of stock options to Milestone Scientific’s officers, employees, directors, and consultants. All compensation arrangements between Milestone Scientific and its directors, officers and affiliates are reviewed by the Compensation Committee.

The Audit Committee meets with management and Milestone Scientific’s independent auditors to determine the adequacy of internal controls and other financial reporting matters; all the members are independent directors. The Board of Directors has determined that, Leslie Bernhard qualifies as an Audit Committee Financial Expert pursuant to Item 407(d)(5) of Regulation S-K, Leslie Bernhard is independent, as that term is defined in the listing standards of the NYSE American.

The Nominating Committee has dual responsibilities. The Nominating Committee will assist the board by identifying and recommending individuals qualified to become member of the board. Additionally, the committee will evaluate the size and composition of the board and its members, reviewing governance issues and making recommendations to the board regarding possible changes and reviewing and monitoring compliance with the code of ethics and insider trading policy.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than ten-percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to us, or written representations that no Forms 5 were required, we believe that all Section 16(a) filing requirements applicable to our officers and director were complied with during the fiscal year ended December 31, 2020.

Code of Ethics

Milestone Scientific has adopted a code of ethics that applies to its directors, principal executive officer, principal financial officer and other persons performing similar functions. This code of ethics is posted on Milestone Scientific’s web site at www.milestonescientific.com. Milestone Scientific will also provide a copy of the Code of Ethics to any person without charge, upon written request addressed to the Chief Financial Officer, Joseph D’Agostino at the principal executive office, located at 425 Eagle Rock road Roseland, NJ 07068.

Item 11. Executive Compensation.

The following Summary Compensation Table sets forth all compensation earned, in all capacities, during the fiscal years ended December 31, 2020 and 2019 by Milestone Scientific’s (i) Interim CEO and (ii) two most highly compensated executive officers other than the Interim CEO who were serving as executive officers at the end of the 2020 fiscal year and whose salary as determined by Regulation S-K, Item 402, exceeded $100,000 (the individuals falling within categories (i) and (ii) are collectively referred to as the “Named Executive Officers”).

SUMMARY COMPENSATION TABLE

Leonard A. Osser (1) (8)

Gian Domenico Trombetta (2)

Chief Executive Officer - Wand Dental Inc 2020 $ 80,000 $ - $ - $ - $ 80,000

Jan Adriaan (Arjan) Haverhals (3)

Chief Executive Officer - Wand Dental Inc

Joseph D'Agostino (4) (8)

Brent Johnston (5)

Sharon Smith (6)

Executive Vice President Global Marketing 2020 $ - $ - $ -

Eric Gilbert (7)

6. Sharon Smith resigned from her position with the Company in October 2019.

Employment Contracts

In July 2017, Milestone Scientific entered into a ten-year employment agreement with Leonard Osser, who previously served as the Company’s President and Chief Executive Officer, to serve as Managing Director – China Operations. This agreement provides for annual compensation of $300,000 consisting of $100,000 in cash and $200,000 in the Company’s common stock valued at the average closing price of the Company’s common stock on the NYSE or such other market or exchange on which its shares are then traded during the first fifteen (15) trading days of the last full calendar month of each year during the term of this agreement. This agreement supersedes all prior employment agreements between Mr. Osser and Milestone Scientific. If the Company terminates Mr. Osser’s employment “Without Cause,” other than due to his death or disability, or if Mr. Osser terminates his employment for “Good Reason” (both as defined in the agreement), Mr. Osser is entitled to be paid in one lump sum payment as soon as practicable following such termination: an amount equal to the aggregate present value (as determined in accordance with Section 280G(d)(4) of the Code) of all compensation pursuant to this agreement from the effective date of termination hereunder through the remainder of the Employment Term.

In July 2017, Mr. Osser resigned from his positions of Chairman of the Board, Chief Executive Office and President of Milestone Medical. Upon his resignation, Milestone Medical entered in a consulting agreement with U.S. Asian Consulting Group LLC, an entity controlled by Mr. Osser, pursuant to which he will provide specific services to Milestone Medical for a ten- year term. Pursuant to the consulting agreement, U.S. Asian Consulting Group, LLC, is entitled to receive $100,000 per year for Mr. Osser's services.

On December 19, 2017, the Board of Directors appointed Leonard Osser Interim Chief Executive Office, replacing Leslie Bernhard. Mr. Osser placed on hold his position as Managing Director-China Operations and his consulting agreement with Milestone Medical to rejoined Milestone Scientific Inc. as Interim Chief Executive Officer and will not receive or earn any compensation under those agreements until he is no longer Interim Chief Executive Officer. Mr. Osser as Interim Chief Executive Officer receives a base salary and may receive bonus determined by the compensation committee of Company.

On March 2, 2021, Milestone Scientific Inc. (the “Company”) entered into a Royalty Sharing Agreement with Leonard Osser, the Company’s Interim Chief Executive Officer, 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 (2.5%) on net sales that would otherwise be payable to Mark and Claudia Hochman under their existing Technology Sale Agreement, dated January 1, 2005 and amended from time to time, with the Company, the Hochman's having agreed with the Company pursuant to an addendum to such Technology Sale Agreement dated February 25, 2021 to reduce from five percent (5%) to two and one-half percent (2.5%) the payments due to them under their Technology Sale Agreement on May 9th, 2027 and thereafter, with respect to dental products. The Agreement confirms an understanding of the Company, Leonard Osser, and the Hochman's on sharing the five percent (5%) royalty to be paid by the Company beginning on May 9, 2027 with respect to dental products embodying the new invention.

Objective of Executive Compensation Program

The primary objective of the executive compensation program is to attract and retain qualified, energetic managers who are enthusiastic about the mission and culture of Milestone Scientific. A further objective of the compensation program is to provide incentives and reward each manager for their contribution. In addition, Milestone Scientific strives to promote an ownership mentality among key leadership and the Board of Directors.

The Compensation Committee reviews and approves, or in some cases recommends for the approval of the full Board of Directors, the annual compensation procedures for the Named Executive Officers.

The compensation program is designed to reward teamwork, as well as each manager’s individual contribution. In measuring the Named Executive Officers’ contribution, the Compensation Committee considers numerous factors including the growth, strategic business relationships and financial performance. Regarding most compensation matters, including executive and director compensation, management provides recommendations to the Compensation Committee; however, the Compensation Committee does not delegate any of its functions to others in setting compensation. Milestone Scientific does not currently engage any consultant to advise on executive and/or director compensation matters.

Stock price performance has not been a factor in determining annual compensation because the price of Milestone Scientific’s common stock is subject to a variety of factors outside of Milestone Scientific’s control. Milestone Scientific does not have an exact formula for allocating between cash and non-cash compensation.

Annual CEO Compensation consists of a base salary component and periodic stock option grants. It is the Compensation Committee’s intention to set totals for the CEO for cash compensation sufficiently high enough to attract and retain a strong motivated leadership team, but not so high that it creates a negative perception with the other stakeholders. The CEO receives stock option grants under the stock option plan. The number of stock options granted to the executive officer is made on a discretionary rather than a formula basis by the Compensation Committee.

The CEO’s current and prior compensation is considered in setting future compensation. To some extent, the compensation plan is based on the market and the companies that compete for executive management. The elements of the plan (e.g., base salary, bonus, and stock options) are like the elements used by many companies. The exact base pay, stock option grant, and bonus amounts are chosen to balance the competing objectives of fairness to all stakeholders and attracting and retaining executive managers.

Outstanding Equity Awards at December 31, 2020

The following table includes certain information with respect to all unexercised stock options and unvested shares of common stock of Milestone Scientific outstanding owned by the Named Executive Officers at December 31, 2020.

Options Awards Stock Awards

1. Represents stock option grants at fair market value on the date of grant.

Director Compensation

The following table shows the compensation earned by or awarded or paid in 2020 to the individuals who served as our non-employee directors during such period. Neither Mr. Osser nor Mr. Trombetta received any additional compensation for their services as a director.

NAME Fees Earned or Paid in Cash ($) Fees Earned or Paid in Common Stock

Michael McGeehan $ - 46,000

Gian Domenico Trombetta $ - 36,000

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table, together with the accompanying footnotes, sets forth information, as of March 29, 2020 , regarding stock ownership of all persons known by Milestone Scientific to own beneficially more than 5% of Milestone Scientific’s outstanding common stock, Named Executives, all directors, and all directors and officers of Milestone Scientific as a group:

Executive Officers and Directors

Jan Adriaan (Arjan) Haverhals (4) 25,478 *

All directors & executive officers as group (8 persons) 18,159,553 23.82 %

* Less than 1%

4. Includes 25,478 shares to be issued at the termination of his employment.

6. Includes 70,000 shares held by Ms. Bernhard.

Securities Authorized for Issuance under Equity Compensation Plans

Equity Compensation Plan Information

The following table summarizes, as of December 31, 2020, the (i) options granted under the Milestone Scientific 2004 Stock Option Plan (the “2004 Plan”), (ii) options granted under the Milestone Scientific 2011 Equity Compensation Plan (f/k/a Milestone Scientific 2011 Stock Option Plan) (the “2011 Plan”) and (iii) options granted under the Milestone Scientific 2020 Equity Incentive Plan (the “2020 Plan”). The shares covered by outstanding options and warrants are subject to adjustment for changes in capitalization, stock splits, stock dividends and similar events. No other equity compensation has been issued.

Grants under our 2004 Stock Option Plan (1) - $ - -

13. Certain Relationships and Related Transactions and DirectorIndependence.

As of December 31, 2020, Milestone Scientific owned a 40% interest in Milestone China. See Note F.

In January 2017, Milestone Scientific entered into a twelve-month agreement with Innovest S.p.A., a significant stockholder of Milestone Scientific, to provide consulting services. This agreement will renew for successive twelve-month terms unless terminated by Innovest S.p.A or Milestone Scientific. Expenses recognized on this agreement were $60,000 and $80,000 for years ended December 31, 2020 and 2019, respectively. This agreement was terminated September 30, 2020.

The Director of Clinical Affairs’ royalty fee was approximately $267,000 and $403,000 for the years ended December 31, 2020 and 2019, respectively. Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of $156,000 for the years ended December 31, 2020, and 2019, respectively. As of December 31, 2020 and 2019 Milestone Scientific owed the Director Clinical Affairs for royalties of approximately $127,000 and $390,000, respectively, which is included in accounts payable, related party and accrued expense, related party.

The Company engaged Gian Domenico Trombetta, former CEO of Wand Dental Inc. as a consultant to Leonard Osser, Interim – Chief Executive Officer of Milestone Scientific for a period of twelve months (beginning October 1, 2020 and ending September 30, 2021). Gian Domenico Trombetta will provide historical International Business, Dental Segment information and business contacts to Mr. Osser and provide consulting services for new International Business and Dental Segment concepts during this twelve-month consulting period. Under this agreement, Mr. Trombetta is to receive $60,000 payable in Milestone Scientific shares.

Item 14. Principal Accounting Fees and Services

Audit Fees and Audit Related

Milestone Scientific incurred audit and financial statement review fees of approximately $330,000 and $302,000, respectively from Friedman LLP, its principal accountant for 2020 and 2019. These fees include fees for professional services rendered for the audit of our annual financial statements and the review of financial statements included in our report on Form 10-Q's or services that are normally provided in connection with statutory and regulatory filings and fees related to registration statements.

Tax Fees

Milestone Scientific incurred tax fees of approximately $34,000 and $36,000 respectively from Friedman LLP, its principal accountant for 2020 and 2019.

All Other Fees

Milestone Scientific did not incur other accounting fees from Friedman LLP, its principal accountant in either 2020 or 2019.

Audit Committee Administration of the Engagement

The engagement with Friedman LLP, the principal accountants, was approved in advance by the Board of Directors and the Audit Committee. No non-audit or non-audit related services were approved by the Audit Committee in 2020.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee charter provides that the Audit Committee will pre-approve audit services and non-audit services to be provided by the independent auditors before the accountant is engaged to render these services. The Audit Committee may consult with management in the decision-making process but may not delegate this authority to management. The Audit Committee may delegate its authority to preapprove services to one or more committee members, provided that the designees present the pre-approvals to the full committee at the next committee meeting. All audit and non-audit services performed by the independent accountants have been pre-approved by the Audit Committee to assure that such services do not impair the auditors’ independence from us.

PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as part of this Report:

1 Financial Statements. See Index to Financial Statements on page F-1.

2 Financial Statement Schedule

3 Exhibits

Exhibit No Description

3.2 Form of Certificate of Designation filed on April 18, 2014 (12)

3.4 Amended and Restated By-laws of Milestone filed April 1, 2019 (23)

3.5 Certificate of Amendment to Restated Certificate of Incorporation (24)

4.1 Specimen stock certificate (2)

4.6 Description of Registrant’s Securities*

10.5 Agreement with Mark Hochman, dated July 2015 (13)

21.1 List of Subsidiaries*

23.1 Consent of Friedman, LLP*

31.1 Rule 13a-14(a) Certification-Chief Executive Officer*

31.2 Rule 13a-14(a) Certification-Chief Financial Officer*

32.1 Section 1350 Certifications-Chief Executive Officer***

32.2 Section 1350 Certifications-Chief Financial Officer***

101.INS XBRL Instance Document*

101.SCH XBRL Taxonomy Extension Schema Document*

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*

101.LAB XBRL Taxonomy Extension Label Linkbase Document*

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*

101.DEF XBRL Taxonomy Extension Definition Linkbase Document*

* Filed herewith.

** Indicates management contract or compensatory plan or arrangement.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Milestone Scientific Inc.

By: /s/ Leonard Osser

Interim Chief Executive Officer

(Principal Executive Officer)

Date: March 31, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Date Title

/s/ Leonard Osser March 31, 2021 Interim Chief Executive Officer

Leonard Osser (Principal Executive Officer)

Joseph D'Agostino (Principal Financial Officer)

March 31, 2021 Chairman and Director

/s/ Leslie Bernhard

Leslie Bernhard

/s/ Gian Domenico Trombetta

Gian Domenico Trombetta

/s/ Leonard Schiller March 31, 2021 Director

Leonard Schiller

/s/ Michael McGeehan March 31, 2021 Director

Michael McGeehan

/s/ Neal Goldman March 31, 2021 Director

Neal Goldman

REPORT INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2020 and 2019

Report of Independent Registered Public Accounting Firm F-2

Consolidated Financial Statements:

Consolidated Balance Sheets F-4

Consolidated Statements of Operations F-5

Consolidated Statements of Changes in Stockholders’ Equity F-6

Consolidated Statements of Cash Flows F-7

Notes to Consolidated Financial Statements F-8- F-28

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Milestone Scientific, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Milestone Scientific, Inc., and subsidiaries (the “Company”) as of December 31, 2020, and 2019, and the related consolidated statements of operations, statements of changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matter Description

Certain inventory requires management to make significant assumptions and subjective judgments about the net realizable value when such medical devices are approved by the appropriate regulatory agencies, but also represent new technology with unproven market acceptance. These estimates include future demand, comparable market data and other assumptions within the sales forecasts without the benefit of historical experience. Given the subjectivity of these estimates, performing audit procedures to evaluate whether inventory was appropriately recorded at December 31, 2020 required a high degree of auditor judgment and an increased extent of effort.

F-2

How We Addressed the Matter in Our Audit

The following are the most relevant procedures :

/s/ Friedman LLP

We have served as the Company’s auditor since 2016.

East Hanover, New Jersey

March 31, 2021

F-3

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

Current assets:

Furniture, fixtures and equipment, net 30,729 44,976

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current portion of finance leases liabilities 7,796 3,904

Current portion of operating lease right-of-use liabilities 72,031 12,073

Finance lease liabilities 28,607 -

Operating lease liabilities 557,981 -

Commitments and contingencies

Stockholders’ equity

See notes to Consolidated Financial Statements

F-4

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2020 AND 2019

Change in fair value of derivative liability - (3,635,580 )

Earnings from equity method investment 97,887 81,324

Net loss attributable to noncontrolling interests 51,539 55,872

Net loss attributable to Milestone Scientific Inc. (7,337,273 ) (7,524,368 )

Net loss per share applicable to common stockholders—

Weighted average shares outstanding and to be issued—

See notes to Consolidated Financial Statements

F-5

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 2020 AND 2019

See notes to Consolidated Financial Statements

F-6

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2020 AND 2019

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Non-cash operating lease expense 34,332 -

Earnings on China joint venture (97,887 ) (81,324 )

Change in fair value of derivative liability - 3,635,580

Changes in operating assets and liabilities:

Decrease in accounts receivable, related party - 100,000

Decrease (increase) in other assets 11,755 (9,027 )

Decrease (increase) in advances on contracts 296,460 (61,879 )

Decrease in accounts payable, related party (973,614 ) (303,346 )

Decrease in deferred cost, related party - 50,000

(Decrease) in accrued expenses, related party (233,959 ) (70,200 )

(Decrease) in deferred revenue, related party - (100,000 )

Cash flows from investing activities:

Purchase of property and equipment (21,438 ) (9,916 )

Net cash used in investing activities (21,438 ) (9,916 )

Cash flows from financing activities:

Payments finance lease obligations (7,622 ) -

Common stock issued to employee for option exercised 384,146 -

Net proceeds from note payable 276,180 -

Net proceeds from Private Placement Offering - 250,000

Net increase (decrease) in cash and cash equivalents 12,707,645 772,843

Cash and cash equivalents at beginning of period 1,516,272 743,429

Supplemental non-cash disclosure of cash flow information:

See notes to Consolidated Financial Statements

F-7

MILESTONE SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — ORGANIZATION AND BUSINESS

All references in this report to “Milestone Scientific,” “us,” “our,” “we,” the “Company” or “Milestone” refer to Milestone Scientific Inc., and its consolidated subsidiaries, Wand Dental, Inc., Milestone Advanced Cosmetic Systems, Inc., Milestone Medical, Inc. and Milestone Education LLC (all described below), unless the context otherwise indicates. Milestone Scientific is the owner of the following registered U.S. trademarks: CompuDent®; CompuMed®; CompuFlo®; DPS Dynamic Pressure Sensing technology®; Milestone Scientific ®; 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, computer-controlled anesthetic delivery device, using The Wand®, a single use disposable handpiece. The device is marketed in dentistry under the trademark CompuDent®, and STA Single Tooth Anesthesia System® and in medicine under the trademark CompuMed®. CompuDent® is suitable for all dental procedures that require local anesthetic. CompuMed® is suitable for many medical procedures regularly performed in Plastic Surgery, Hair Restoration Surgery, Podiatry, Colorectal Surgery, Dermatology, Orthopedics, and many other disciplines. The dental devices are sold in the United States, Canada and in 60 other countries. Certain medical devices have obtained CE mark approval and can be marketed and sold in most European countries. In June 2017, Milestone Scientific received 510(k) marketing clearance from the U.S. Food and Drug Administration (FDA) on the CompuFlo® Epidural Computer Controlled Anesthesia System (“Epidural”). Through December 31, 2020 date there have been seven (7) medical devices sold in the United States and limited amounts sold internationally.

In December 2016, we received notification from the FDA that based upon the 510(k)-application submitted for intra- articular injections, we did not adequately document that the device met the equivalency standard required for 510(k) clearances. Following consultation with the FDA Office of Device Evaluation, we intended to file a new 510(k) application for the device in 2019, however, due to financing constraints, a new 510(k) application was not filed in 2019. The Company plans to file a new 510(k) application for the device in 2021, subject to sufficient funds being available.

In February 2019, Milestone Scientific consummated a public offering and a private placement of common stock. The public offering generated gross proceeds of approximately $2.0 million for the issuance of 5,715,000 shares of common stock and warrants to purchase 1,428,750 shares of common stock. Subsequently the underwriter exercised its over-allotment option and paid approximately $198,000 for 567,400 additional shares of common stock and 141,850 warrants. Also, in February 2019, the Company generated gross proceeds from a private placement of approximately $250,000 for 714,286 shares of common stock and warrants to purchase 178,571 shares of common stock from Bp4 S.p.A., a principal stockholder of Milestone Scientific, that exercised its right to participate on a pro-rata basis on the aforementioned public offering.

In April and June of 2020, the Company completed two Common Stock Offerings generating net proceeds of approximately $4.6 million and $13.4 million, respectively (see Note I).

NOTE B- 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.

In April and June of 2020, the Company completed two Common Stock Offerings generating net proceeds of approximately $4.6 million and $13.4 million, respectively. As of December 31, 2020, cash on hand was approximately $14.2 million, an increase of $12.7 million from December 31, 2019. With the combination of these two Common Stock Offerings, the Company has sufficient liquidity to support operations beyond one year from the consolidated financial statement filing date.

The coronavirus (COVID-19) that was reported to have surfaced in Wuhan, China in December 2019 and that has now spread to other countries throughout the world has adversely impact our operations and those of our third-party partners. As a result of the reduced hours and closings of dental offices throughout the country and the rest of the world, revenues for the 12 months ended December 31, 2020 were adversely affected.

F-8

Although there was an increase in dental instrument and disposable sell through to dentists beginning in the third quarter of 2020, it is too early to determine what the continuing effect COVID-19 may have on the Company. In addition, it is uncertain as to what the effect will be on our commercialization effort of our CompuFlo Epidural and CathCheck system as a medical device. Such future developments could have a material adverse effect on our financial results and our ability to conduct business as expected. See Note N- Concentrations

NOTE C — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and include the accounts of Milestone Scientific and its wholly owned and majority owned subsidiaries, including, Wand Dental (wholly owned), Milestone Advanced Cosmetic (majority owned) and Milestone Medical (majority owned). All significant, intra-entity transactions and balances have been eliminated in the consolidation.

2. Reclassifications

Certain reclassifications have been made to the 2019 financial statements to conform to the condensed consolidated 2020 financial statement presentation. These reclassifications had no effect on net loss or cash flows as previously reported.

3. Use of Estimates

The preparation of 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 assets and 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 allowance for doubtful accounts, inventory valuation, and cash flow assumptions regarding evaluations for impairment of long-lived assets and going concern considerations, and valuation allowances on deferred tax assets. Actual results could differ from those estimates.

4. Revenue Recognition

i. identification of the promised goods or services in the contract;

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. In the future, if any of these factors and/or the history of product returns change, adjustments to the allowance for product returns may be required.

F-9

Financing and Payment

Our payment terms differ by geography and customer, but payment is generally required within 90 days from the date of shipment or delivery.

Disaggregation of Revenue

We operate in two operating segments: dental and medical. Therefore, results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting. See Note M for revenues by geographical market, based on the customer’s location, and product category for the years December 31, 2020 and 2019.

5. Variable Interest Entities

If Milestone Scientific determines that it has operating power and the obligation to absorb losses or receive benefits, Milestone Scientific consolidates the VIE as the primary beneficiary. Milestone Scientific’s involvement constitutes power that is most significant to the entity when it has unconstrained decision-making ability over key operational functions within the entity.

Because Milestone Scientific has a variable interest in Milestone China, it considered the guidance in ASC 810, “Consolidation” as it relates to determining whether Milestone China is a VIE and, if so, identifying the primary beneficiary. Milestone Scientific would be considered the primary beneficiary of the VIE if it has both of the following characteristics:

Milestone Scientific does not have the ability to control the activities that most significantly impact Milestone China's economics and, therefore, the power criterion has not been met. Management placed the most weight on the relationship and significance of activities of Milestone China to the CEO and a group of significant shareholders, including the CEO, of Milestone China who have the power to direct the activities that most significantly impact the economic performance of Milestone China. Management has concluded that Milestone Scientific is not the primary beneficiary under ASC 810. Accordingly, Milestone China has not been consolidated into the financial statements of Milestone Scientific and is accounted for under the equity method. See Note F.

6. 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 December 31, 2020 and 2019 Milestone Scientific has approximately $13.1 million and $302,000 of investments with short term maturities classified as cash equivalents. At times, such cash, may be more than the Federal Deposit Insurance Corporation insurance limit. As of December 31, 2020, the Company has approximately $700,000 of cash in excess of FDIC coverage.

7. Accounts Receivable

Milestone Scientific sells a significant amount of its product on credit terms to its major distributors. Milestone Scientific estimates losses from the ability or inability of its customers to make payments on amounts billed. Most credit sales are due within 90 days from invoicing. There have not been any significant credit losses incurred to date. As of December 31, 2020 and 2019, accounts receivable was recorded, net of allowance for doubtful accounts of $10,000.

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.

F-10

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. Equity Method Investments

Investments in which Milestone Scientific can exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in the long-term assets on the Consolidated Balance Sheets. Under this method of accounting, Milestone Scientific's share of the net earnings or losses of the investee is presented below the income tax line on the Consolidated Statements of Operations. Milestone Scientific evaluates its equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

10. Furniture, Fixture and Equipment

Equipment is recorded at cost, less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, which range from two to seven years. The costs of maintenance and repairs are charged to operations as incurred.

11. Intangible Assets – Patents and Developed Technology

Patents are recorded at cost to prepare and file the applicable documents with the US Patent Office, or internationally with the applicable governmental office in the respective country. The costs related to these patents are being amortized using the straight-line method over the estimated useful life of the patent. Patents and other developed technology acquired from another business entity are recorded at acquisition cost and be amortized at the estimated useful life. Patent defense costs, to the extent applicable, are expensed as incurred.

12. Impairment of Long-Lived Assets

Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company’s impairment review process is based upon an estimate of future undiscounted cash flow. Factors the Company considers that could trigger an impairment review include the following:

• significant negative industry or economic trends

• significant technological changes, which would render the technology obsolete

13. Note Payable

On April 27, 2020, the Company, was granted a loan (the “Loan”) from Savoy Bank. in the aggregate amount of approximately $276,000, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The Loan, which was in the form of a Note dated April 27, 2020, matures on April 27, 2022, and bears interest at a rate of 1.00% per annum, payable monthly commencing on November 26, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. The company is in the process of applying for loan forgiveness.

F-11

14. Research and Development

Research and development costs, which consist principally of new product development costs payable to third parties, are expensed as incurred. Advance payments for the research are amortized to expense either as services are performed or over the relevant service period using the straight-line method.

15. Income Taxes

Milestone Scientific accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

At December 31, 2020 and 2019, we had no uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Operations. No interest and penalties are present for periods open. Tax returns for the 2017, 2018 and 2019 years are subject to audit by federal and state jurisdictions.

16. 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 during each period. The calculation of diluted earnings per common share is like that of basic earnings per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of stock options and warrants were issued during the period.

Since Milestone Scientific had net losses in the year ended December 31, 2020 and 2019, the assumed effects of the exercise of potentially dilutive outstanding stock options, and warrants, were not included in the calculation as their effect would have been anti-dilutive. Such outstanding options, and warrants totaled 8,397,836 and 2,336,611 on December 31, 2020 and 2019, respectively.

17. 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). We are required to classify fair value measurements in one of the following categories:

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 December 31, 2020 and 2019 the Company does not have any assets or liabilities that were measured at fair value on a recurring basis.

During the year ended December 31, 2019 the Company did not have sufficient authorized shares to support the exercise of outstanding securities and reclassified all outstanding warrants and certain employee stock options to liability classification, measured using level 3 inputs and reclassified all shares-to-be-issued measured using level 1 inputs, the trading price of the Company’s stock. At December 17, 2019, the Company increased the number of authorized shares available, extinguishing the derivative liability. The roll forward of the liability associated with certain outstanding warrants and stock options which use level 3 inputs is as follows. Refer to Note I for more detail.

F-12

Balance at beginning of year $ -

Warrants issued in connection with public offering (See Note I) 376,497

Change in fair value of derivative liability 422,484

Employee options reclassified as derivative liability 500,000

Change in value of derivative securities – exercised (655,000 )

Reversal of derivative liability for exercised warrants 820,954

Balance at end of period $ -

18. Derivative Liability

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks; however, the Company has certain financial instruments that qualify as derivatives and are classified as liabilities on the balance sheet. The Company evaluates all its financial instruments to determine if those instruments or any potential embedded components of those instruments qualify as derivatives that need to be separately accounted for in accordance with FASB ASC 815, “Derivatives and Hedging”. Derivatives satisfying certain criteria are recorded at fair value at issuance and marked-to-market at each balance sheet date with the change in the fair value recorded as income or expense. In addition, upon the occurrence of an event that requires a derivative liability to be reclassified to equity, the derivative liability is revalued to fair value at that date. See Note I, Outstanding Equity Instruments in Excess of Authorized Shares.

19. Stock-Based Compensation

Milestone Scientific accounts for stock-based compensation under ASC Topic 718, Share-Based Payment. ASC Topic 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the Statements of Operations over the service period, as an operating expense, based on the grant-date fair values.

The fair value of the non-employee options were also estimated on the date of grant using the Black Scholes option-pricing model. See Note J.

20. Recent Accounting Pronouncements

In December 2019, FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which clarifies for the accounting treatment for the accounting tax aspects relating, in part, to the intraperiod allocations and foreign subsidiaries. ASU 2019-12 is effective for all entities with fiscal years beginning after December 15, 2020. The adoption of this standard is not expected to have a material effect on financial statement presentation.

In January 2020, FASB issued ASU 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), which, generally, provides guidance for investments in entities accounted for under the equity method of accounting. ASU 2020-01 is effective for all entities with fiscal years beginning after December 15, 2021, including interim periods therein. The company is analyzing the impact of the adoption of this standard is not expected to have a material effect on financial statement presentation.

In August 2020, FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity; which, generally, provides guidance for accounting regarding derivatives relating to entities common stock and earnings per share. ASU 2020-06 is effective for all entities with fiscal years beginning after December 15, 2021, including interim periods therein. The adoption of this standard is not expected to have a material effect on financial statement presentation.

F-13

NOTE D — INVENTORIES

Inventories consist of the following: December 31, 2020 December 31, 2019

At December 31, 2020, there are allowances for slow moving medical finished goods of approximately $450,000 and damaged slow moving dental finished goods of approximately $3,000. In July 2019, United System issued a credit to the Company for approximately $151,000 for handpieces found to be defective. The Company recorded the credit in cost of sales because the Company previously recorded an allowance against the associated inventory during 2018. At December 31, 2019, there was a reserve for slow moving medical finished goods of $450,000 and damaged slow moving dental finished goods of $318,000. During 2020 $315,000 of previously reserved for dental finished good inventory was destroyed. The reserve for the medical finished goods was provided due to the delay in commercialization of the intra-articular medical instrument.

NOTE E — ADVANCES ON CONTRACTS

The advances on contracts represent funding of future dental STA, and epidural inventory purchases and epidural replacements parts. The balance of the advances as of December 31, 2020 and 2019 is approximately $414,000 and $710,000, respectively.

NOTE F – INVESTMENT IN AND TRANSACTIONS WITH EQUITY INVESTEES

Milestone China Ltd.

Ownership

In June 2014, Milestone Scientific invested $1 million in Milestone China Ltd. (“Milestone China”), by contributing dental instruments to Milestone China for a forty (40%) ownership interest. Milestone China owns approximately 75% of Milestone Beijing Medical Equipment Company, Ltd (“Milestone Beijing”). Milestone Beijing has primary responsibility for the sales, marketing, and distribution of the Company’s dental products in China. Milestone Scientific recorded their investment in Milestone China under the equity method of accounting.

In first quarter 2020, Milestone China and certain marketing affiliates entered into a plan to merge (the Transaction) into an affiliated manufacturing company, Anhui Maishida Medical Technology, Co. Ltd. (Anhui). Anhui will be the surviving entity after the merger and will have complete responsibility for sales, marketing, and distribution for the Company’s dental products in China. However, as of the filing date of this Annual Report, due to the COVID-19 Pandemic, the regulatory documentation for the planned merger has been placed in suspense since applicable government offices are still closed in China and Hong Kong. After completion of the Transaction, Milestone Scientific is expected to have an approximate 28.4% direct ownership in Anhui. Milestone China and certain marketing affiliates are expected to be dissolved upon completion of the merger and upon the required regulatory filings in China and Hong Kong.

Related Party Transactions

Milestone China is Milestone Scientific’s exclusive distributor in China. During 2017 and prior to the payment default during 2018, Milestone Scientific agreed to sell inventory to Milestone China and its agent. During 2018, Milestone Scientific entered into a payment arrangement with Milestone China to satisfy past due receivables from Milestone China and its agents which amounted to $2.8 million at the time of the payment arrangement. Milestone Scientific collected $950,000 under this arrangement, until Milestone China defaulted on the payment arrangements. Milestone Scientific halted shipments to Milestone China.

F-14

During the year ended December 31, 2020 Milestone Scientific shipped 100 instruments to Milestone China and its agents and recognized revenue of $75,000. As of December 31, 2020, the Company has approximately $183,000 of deposits from Milestone China for future shipment of goods included in accrued expenses, related party on the accompanying consolidated balance sheet. During the year ended December 31, 2019, Milestone Scientific recognized gross revenue associated with 2018 delivered products to Milestone China and its agents of approximately $259,000, offset by accepted returns of approximately $104,000 that was previously deferred as a result of additional cash collected.

In April of 2020, the Company entered into an agreement with United Systems, Inc., related party (see Note O) regarding certain handpieces supplied to Milestone China in 2018, that were billed and shipped to Milestone China by United Systems, as well as STA instruments billed to United Systems and delivered to Milestone China, and not paid by Milestone China. United Systems sold their entire accounts receivable due from Milestone China for the above- described handpieces and STA instruments for $370,260 to Milestone Scientific. Milestone Scientific paid United Systems the sale price as follows; $100,000 in cash paid in April 2020, $170,260 in shares of the Company’s Common Stock (priced as of the close of business on April 23, 2020, $1.59 ) issued in June 2020, and $100,000 in cash paid in July 2020. The Company is entitled to the cash collections, if and when received, on the accounts receivable due to United Systems prior to this agreement up to approximately $1.4 million. The Company has recorded a charge to the consolidated statement of operations for $370,260 during the twelve months ended December 31, 2020.

In May 2020, Milestone Scientific finalized an agreement for the purchase of Milestone China’s 50% interest in Advanced Cosmetic Systems Inc., for the forgiveness of $900,000 in accounts receivable owed by Milestone China to Milestone Scientific (and previously fully reserved for), resulting in a noncash transaction. Milestone China will have the option to repurchase the 50% interest in Advanced Cosmetic Systems within one year from the sale date for $900,000 in cash. As a result of the purchase Milestone Scientific will own 100% of Advanced Cosmetic Systems Inc. at the expiration of the option period.

Gross Profit Deferral

Due to timing differences of when the inventory sold to Milestone China is recognized and when Milestone China sells the acquired inventory to third parties, an elimination of the profit is required as of the balance sheet date. In accordance with ASC 323 Equity Method and Joint Ventures, Milestone Scientific has deferred 40% of the gross profit associated with recognized revenue from sales to Milestone China until that product is sold to third parties.

At December 31, 2020 and 2019, the deferred profit was approximately $243,000 and $340,000, respectively, which is included in deferred profit, related party in the condensed consolidated balance sheets. For twelve months ended December 31, 2020 and 2019 Milestone Scientific recorded earnings on equity investment of $97,887 and $81,324 respectively, for product sold by Milestone China to third parties.

Equity Method Disclosures

Milestone Scientific, in previous years, reduced its investment in Milestone China to zero and had accumulated losses over the investment balance of approximately $4.3 million as of December 31, 2019 and $5.9 million at December 31, 2020, which have been suspended.

F-15

The following includes summarized financial information of Milestone China for the year ending December 31, 2019.

Assets:

Liabilities and stockholders’ deficit:

Total liabilities and stockholders’ deficit $ 13,475,171

However, as of the filing date of this Quarterly Report, due to the COVID-19 Pandemic, the regulatory documentation for the planned merger has been placed in suspense since applicable government offices are still closed in China and Hong Kong.

The following includes summarized combined financial information of Milestone China and Anhui for the year ending December 31, 2020.

Assets:

Liabilities and stockholders’ deficit:

Total liabilities and stockholders’ deficit $ 8,767,210

F-16

NOTE G— FURNITURE, FIXTURES AND EQUIPMENT

Furniture, Fixtures and Equipment consist of the following:

Depreciation expense was approximately $43,000 and $47,500 for the years ended December 31, 2020 and 2019, respectively.

NOTE H — PATENTS

Cost Accumulated Amortization Net

Patents are amortized utilizing the straight-line method over estimated useful lives ranging from 3 to 20 years. Amortization expense was $53,013 for the year ended December 31, 2020 and 2019, respectively. The annual amortization expense expected to be recorded for existing intangibles assets for the years 2021 through 2025 is approximately $53,000, $53,000, $47,000, $33,000 and $24,000.

NOTE I — STOCKHOLDERS’ EQUITY

PUBLIC OFFERING AND PRIVATE PLACEMENT

In February 2019, Milestone Scientific consummated a public offering and a private placement of Common Stock. The public offering generated gross proceeds of approximately $2.0 million for the issuance of 5,715,000 shares of common stock and warrants to purchase 1,428,750 shares of common stock. The warrants’ term is 5 years, and they are exercisable at $0.50 per share. Subsequent to the public offering the underwriter exercised its over-allotment option and paid approximately $198,000 for 567,400 additional shares of common stock and 141,850 warrants.

Also, in February 2019, the Company generated gross proceeds from a private placement of approximately $250,000 for 714,286 shares of common stock and warrants to purchase 178,571 shares of common stock from Bp4 S.p.A., a principal stockholder of Milestone Scientific, that exercised its right to participate on a pro-rata basis on the recent public offering. Bp4’s CEO is a director of Milestone Scientific. The warrants’ term is 5 years, and they are exercisable at $0.50 per share.

F-17

In the second quarter of 2020, the Company completed two public offerings. In April 2020, a Common Stock offering generating gross proceeds of approximately $5.1 million (5,420,000 common shares and 2,710,000 warrants). The combined price of the shares and warrants was $0.95 per share. The warrants are exercisable at a price of $1.20 per share and have an expiration of three (3) years from the issue date. In June 2020, the Company completed a second Common Stock offering generating gross proceeds of approximately $14.6 million (6,770,000 common shares and 3,749,000 warrants). The combined price of the shares and warrants was $2.15 per share. The warrants are exercisable at $2.60 and expire three (3) years from the issue date.

WARRANTS

The following table summarizes information about shares issuable under warrants outstanding at December 31, 2020:

Expired or cancelled - - -

PREFERRED STOCK

In May 2014, Milestone completed a private placement, which raised gross proceeds of $10 million, from the sale of $3 million of Milestone Scientific common stock (two million shares at $1.50 per share) and $7 million of our Series A Convertible Preferred Stock ("preferred stock") (7,000 shares at $1,000 per share). These shares were convertible, at the option of the holder, into the number of shares of common stock equal to the stated value divided by $2.545, subject to anti-dilution adjustments, at any time before May 14, 2019.

These shares were mandatory convertible on May 14, 2019, into the number of shares of common stock equal to the stated value divided by $2.54 per share or $1.50 per share if the common stock does not trade at $3.15 for period of time, as defined by the agreements, both subject to anti-dilution adjustment.

On May 14, 2019, the mandatory conversion date, the Preferred Stock was converted at a rate of $1.17 per common share resulting in the issuance of 5,982,906 shares of common stock.

SHARES TO BE ISSUED

As of December 31, 2020 and 2019, there were 2,256,844 and 2,226,473 shares to be issued whose issuance has been deferred under the terms of an employment agreements with the Chief Executive Officer, Chief Financial Officer, and other employees of Milestone Scientific. Such shares will be issued to each party upon termination of their employment.

As of December 31, 2020 and 2019, there were 171,485 and 149,287 shares to be issued to non-employees, respectively, that will be issued to non-employees for services rendered. The number of shares was fixed at the date of grant and were fully vested upon grant date.

F-18

The following table summarizes information about shares to be issue at December 31, 2020.

OUTSTANDING EQUITY INSTRUMENTS IN EXCESS OF AUTHORIZED SHARES

As a result of the shares and warrants issued in the public and private offerings as well as other issuance of common stock during 2019, the Company did not have a sufficient number of authorized shares of common stock to cover the exercise and issue of outstanding equity instruments. Therefore, certain equity instruments are classified as liabilities until there is a sufficient number of authorized shares of common stock to cover the shares issuable upon exercise of the equity instruments. As long as these equity instruments are liability-classified, they will continue to be re-measured each reporting period, with any increase or decrease in value recorded as a loss or gain in the consolidated statement of operations.

During 2019, the Company initially reclassified approximately 1.6 million warrants issued during the 2016 capital raise, 1.7 million warrants during the 2019 capital raise, 0.6 million employee options, and 3.4 million shares to be issued, totaling approximately $-, $376,000, $422,000, and $1,405,000, respectively. During the year, approximately 665,000 of the warrants issued in 2019, and 1.3 million shares to be issued were exercised and issued, respectively. Through the exercise date and issuance date, these warrants, and shares to be issued were marked to market and a loss of $0.5 million and $0.5 million was recognized, respectively. At the exercise and issuance dates, this resulted in a reclassification of the derivative liabilities to additional paid in capital of approximately $0.65 million and $1.07 million, respectively.

The fair value of the Company’s shares to be issued is measured using the trading price of the Company’s stock on the measurement and reclassification dates and the fair value of the warrants and stock options is determined using a Black-Scholes option pricing model on the measurement and reclassification dates.

On December 17, 2019, the Company’s shareholders increased the authorized share limit to 75,000,000, and the Company had sufficient authorized shares to cover the exercise and issuance of all outstanding securities, settling and reclassifying the outstanding derivative liability. At time of reclassification approximately 1.6 million warrants issued during 2016 capital raise, 1.1 million warrants during the 2019 capital raise, 0.6 million employee options, and 2.1 million shares to be issued, were marked to market for reported losses (gains) totaling approximately $-, $860,000, ($40,000), and $1,800,000, respectively, or approximately $2.6 million. At December 17, 2019, the reclassification of derivative liabilities to additional paid in capital was approximately $-, $1,095,000, $380,000, and $2,640,000, respectively for a total of approximately $4.1 million.

The following assumptions were used to value the warrants and stock options at the reclassification to liability date:

2016 Warrants 2019 Warrants Employee Stock Options

Expected Term .2-.5 years 4.9 years 1.1 – 2.22 years

Weighted average fair value of securities granted $ - $ 0.22 $ 0.72

F-19

During the year ended December 31, 2019 approximately 675,000 liability classified warrants were exercised. At time of exercise, these warrants were revalued using the following assumptions:

Fair Value of Common Stock $ 0.83 – 1.42

Expected Term 4.2 -4.3 years

Dividend yield 0.00 %

Exercise Price $ 0.50

Risk-free interest rate 1.38 – 1.73 %

Weighted average fair value of warrants exercised $ 0.98

Number of shares underlying warrants exercised 665,000

The reclassification to additional paid in capital was approximately $655,000, and a mark to market loss of approximately $500,000 was recognized up to the date of reclassification. In addition, during 2019, approximately 1.3 million shares to be issued were issued at a weighted average trading price $0.84 which resulted to a reclassification to additional paid in capital of $1.07 million and a mark to market loss of approximately $500,000 up to the date of reclassification.

In December 2019, upon the increase of the authorized shares of common stock to 75,000,000, the derivative liabilities associated with the lack of authorized shares were reclassified into equity and revalued using the following assumptions:

2016 Warrants 2019 Warrants Employee Stock Options

Fair Value of Common Stock $ 1.28 $ 1.28 $ 1.28

Expected Term 0.1 years 4.1 years 1- 2.1 years

Weighted average fair value of warrants granted $ - $ 1.01 $ 0.64

The reclassification to additional paid in capital for the 2016 warrants, 2019 warrants, and employee stock options was approximately $-, $1,095,000, $380,000, respectively. A mark to market loss (gain) of approximately $-, $860,000, and ($40,000) was recognized. In addition, the remaining 2.1 million shares to be issued resulted in a reclassification to additional paid in capital of approximately $2.7 million and a loss on re-measurement up to that date of approximately $1.8 million.

NOTE J — STOCK OPTION PLANS

In June 2011, the stockholders of Milestone Scientific approved the 2011 Stock Option Plan (the "2011 Plan") which originally provided for stock options to our employees, directors and consultants and incentive and non-qualified stock options to purchase up to 2,000,000 shares of common stock and was later amended in 2016 to increase the maximum number of shares reserved for grant to 4,000,000. Generally, options become exercisable over a three-year period from the grant date and expire five years after the date of grant. As of December 31, 2020 the company has 424,425 remaining options available for grants.

The Milestone Scientific Inc. 2020 Equity Incentive Plan provides for awards of restricted common stock and options to purchase up to a maximum 2,000,000 shares of common stock and expires in December 2030. Options may be granted to employees, directors, and consultants of Milestone Scientific for the purchase of shares of common stock at a price not less than the fair market value of common stock on the date of grant. In general, options become exercisable over a three-year period from the grant date and expire five years after the date of grant. For the year ended December 31, 2020 there were no shares issued, and the full 2,000,000 remain available for grants.

F-20

Milestone Scientific recognizes compensation expense over the requisite service period and in the case of performance-based options over the period of the expected performance. For the twelve months ended December 31, 2020 and 2019, Milestone Scientific recognized approximately $537,000, and $181,000 of total employee compensation cost, respectively, recorded in general and administrative expenses on the statement of operations.

As of December 31, 2020 and 2019, there was $936,442 and $82,526 of total unrecognized compensation cost related to non- vested options, respectively. Milestone Scientific expects to recognize these costs over a weighted average period of 2.98 and 1.75 years as of December 31, 2020 and 2019, respectively.

A summary of option activity for employees under the plans and changes during the years ended December 31, 2020 and 2019 is presented below:

Granted - - - -

Exercised during 2019 - - - -

The Company used the following assumptions to calculate the fair value of the stock option grants using the Black-Scholes option pricing model on the measurement date during the year ended December 31, 2020, risk free interest rate of 1.73% to 1.81%, Volatility of 89.80% to 92.90% (which is based on the Company’s historical volatility over the expected term), expected term of 3 to 5 years, 0% dividend rate and closing price of the stock of $1.99 to $2.16.

A summary of option activity for non-employees under the plans and changes during the years ended December 31, 2020 and 2019, is presented below:

Exercised during 2019 - - - -

Exercised during 2020 - - - -

The fair value of the non-employee options was estimated on the date of grant using the Black Scholes option-pricing model at the date of grant. For the twelve months ended December 31, 2020 and 2019, Milestone Scientific recognized approximately $13,600 and $2,400 expense related to non-employee options, respectively.

The Company used the following assumptions to calculate the fair value of the stock option grants using the Black-Scholes option pricing model on the measurement date during the year ended December 31, 2020, risk free interest rate of 0.2% -0.5 %, Volatility of 86.97% to 94.05%, expected term of 5 years, 0% dividend rate and closing price of the stock of $1.65 to $1.75.

F-21

NOTE K–EMPLOYMENT CONTRACT AND CONSULTING AGREEMENTS

Employment Contracts

On December 1, 2016, Wand Dental and Gian Domenico Trombetta (“Trombetta”) entered into an Amended and Restated Employment Agreement (the “Agreement”), pursuant to which Trombetta receives base compensation of $280,000 per year and is eligible to receive annual bonuses in the sole discretion of the Compensation Committee. Pursuant to the Agreement, Trombetta will continue to serve as the Chief Executive Officer of Wand Dental for a period of one-year beginning on September 1, 2016 through August 31, 2017 (the “Employment Term”). The Employment Term automatically renews for a one-year period, from September 1st through August 31st of each successive year (each a “Renewal Term”), unless prior to June 1st of the Employment Term or any Renewal Term, as applicable, either party notifies the other that he or it chooses not to extend the term of employment in accordance with the terms of the Agreement. In May 2020, Trombetta resigned as Chief Executive Officer of Wand Dental.

In July 2017, Mr. Osser also resigned from his positions of Chairman of the Board, Chief Executive Office and President of Milestone Medical. Upon his resignation, Milestone Medical entered in a consulting agreement with U.S. Asian Consulting Group LLC, an entity controlled by Mr. Osser, pursuant to which he will provide specific services to Milestone Medical for a ten- year term. Pursuant to the consulting agreement, U.S. Asian Consulting Group, LLC, is entitled to receive $100,000 per year for Mr. Osser's services.

On December 19, 2017, the Board of Directors appointed Leonard Osser Interim Chief Executive Office, replacing Leslie Bernhard .Mr. Osser placed on hold his position as Managing Director-China Operations and his consulting agreement with Milestone Medical to rejoined Milestone Scientific Inc. as Interim Chief Executive Officer and will not receive or earn any compensation under those agreements until he is no longer Interim Chief Executive Officer. Mr. Osser as Interim Chief Executive Officer receives a base salary and may receive bonus determined by the compensation committee of Company.

NOTE L — INCOME TAXES

Due to Milestone Scientific's history of operating losses, a full valuation allowances have been provided for all of Milestone Scientific's deferred tax assets. At December 31, 2020 and 2019, no recognition was given to the utilization of the remaining net operating loss carry forwards in each of these periods.

Deferred tax attributes resulting from differences between financial accounting amounts and tax bases of assets and liabilities at December 31, 2020 and 2019 are as follows:

Allowance for Doubtful Accounts $ 2,000 $ 2,000

Impaired Assets - -

Non-current deferred tax asset - -

F-22

As of December 31, 2020 federal net operating loss carry-forwards are approximately $66,000,000. As of December 31, 2019, Milestone Scientific has federal net operating loss carry-forwards of approximately $59,000,000, which is comprised solely of losses attributable Milestone Scientific and its subsidiaries. Net operating losses generated before December 31, 2017 will be available to offset future income, if any, through December 2037. During 2020 and 2019 approximately $3.4 million and $4.5 million of net operating losses expired, respectively. Net operating losses generated in 2018 or after can be carried forward

indefinitely.

State net operating losses were approximately $56,300,000 and 56,700,000 for the periods ended December 31, 2020 and 2019, respectively. Net operating losses will be available to offset future taxable income, if any, through December 2040.

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 100% valuation allowance for all its deferred tax assets due to uncertainty as to their future realization.

As of December 31, 2020, and 2019, state tax liability was approximately $24,000 and $18,000, respectively. Such expense was recognized in selling, general and administrative expenses in the consolidated financial statements.

Accounting for uncertainties in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure, and transition. At December 31, 2020 and 2019, we had no uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Statements of Operations. No interest and penalties are present for periods open. Tax returns for the 2017, 2018, and 2019 years are subject to audit by federal and state jurisdictions.

A reconciliation of the statutory tax rates for the years ended December 31, is as follows:

Statutory rate 21 % 21 %

State income tax-all states 1 4

Warrant Revaluation - (11 )

NOL Expiration (11 ) (22 )

Other 8 (3 )

Valuation allowance -19 % 11 %

Effective tax rate - -

NOTE M — SEGMENT AND GEOGRAPHIC DATA

We conduct our business through two 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:

Years Ended December 31,

Sales

F-23

MLSS US Equity

MLSS · 10-K · period ended 2020-12-31

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements

Item 9. Change in and Disagreements with Accountants on Accounting andFinancial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers, Promoters, Control Persons and CorporateGovernance; Compliance with Section 16 (a) of the Exchange Act.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits and Financial Statement Schedules

MLSS US Equity☆

MLSS · 10-K · period ended 2020-12-31

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements

Item 9. Change in and Disagreements with Accountants on Accounting andFinancial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers, Promoters, Control Persons and CorporateGovernance; Compliance with Section 16 (a) of the Exchange Act.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits and Financial Statement Schedules

MLSS US Equity