mlss20221231_10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2022

For the transition period from to

Commission file number 001-14053

Milestone Scientific Inc.

(Exact name of registrant as specified in its charter)

425 Eagle Rock Avenue, Roseland, NJ07068

(Address of principal executive offices)

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

Securities registered pursuant to Section12(b) of the Act:

Title of each class Symbol Name of each exchange on which registered

Common Stock, par value $.001 per share MLSS NYSE American

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

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

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

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

Large, accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☑

Emerging Growth Company ☐

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

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

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

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

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

As of June 30, 2022, the last business day of the registrants most recently completed second fiscal quarter, the aggregate market value of the common stock held by non- affiliates of the issuer was $43,102,239 This amount is based on the closing price of $0.92 per share of the registrant's common stock as of such date, as reported on the NYSE American. As of March 30, 2023, the registrant has a total of 69,998,525 shares of Common Stock, par value $0.001 per share outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

MILESTONE SCIENTIFIC INC.

Form 10-K Annual Report

TABLE OF CONTENTS

PART I

Item 1. Business 4

Item 1A. Risk Factors 11

Item 1B. Unresolved Staff Comments 21

Item 2. Description of Property 22

Item 3. Legal Proceedings 22

Item 4. Mine Safety Disclosure 22

PART II

Item 6. Selected Financial Data 23

Item 7. Management's Discussion and Analysis or Plan of Operations 24

Item 7A. Quantitative and Qualitative Disclosure about Market Risk 29

Item 8. Financial Statements 29

Item 9A. Controls and Procedures 30

Item 9B. Other Information 30

Item 9C. Disclosure regarding Foreign Jurisdiction that Prevent inspections 30

PART III

Item 11. Executive Compensation 31

Item 14. Principal Accounting Fees and Services 31

PART IV

Item 15. Exhibits and Financial Statement Schedules 32

SIGNATURES 34

EXHIBITS

FORWARD-LOOKING STATEMENTS

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements of Milestone Scientific Inc. (“Milestone Scientific”) to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Milestone Scientific’s plans and objectives are based, in part, on assumptions involving the continued expansion of its business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Milestone Scientific. Although Milestone Scientific believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate. Considering the significant uncertainties inherent in the forward-looking statements included herein, particularly in view of our history of operating losses that are expected to continue, requiring additional funding which we may be unable to raise capital when needed (which may force us to delay, curtail or eliminate commercialization efforts of our CompuFlo Epidural Computer Controlled Anesthesia System), the early stage operations of and relatively lack of acceptance of our medical products, relying exclusively on two third parties to manufacture our products, changes to our distribution arrangements exposes us to risks of interruption of marketing efforts and building new marketing channels, changes in our informal manufacturing arrangements made by the manufacturer of our products and disruptions at the manufacturing facility of our manufacturers, including shortages of or delays in obtaining chips and other components, exposes us to risks that may harm our business, raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights, if physicians do not accept nor use our CompuFlo Epidural Computer Controlled Anesthesia System, our ability to generate revenue from sales will be materially impaired, exposure to the risks inherent in international sales and operations, including China, and developments by competitors may render our products or technologies obsolete or non-competitive, the inclusion of such information should not be regarded as a representation by Milestone Scientific or any other person that the objectives and plans of Milestone Scientific will be achieved. Milestone Scientific undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

PART I

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 Medical, Inc. (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 ®;CathCheck®; the Milestone logo ®; SafetyWand®; STA Single Tooth Anesthesia System®; and The Wand ®.

Item1. Business

Overview

Milestone Scientific was incorporated in the State of Delaware in August 1989. Milestone Scientific has developed a proprietary, revolutionary, computer-controlled anesthetic delivery device, our DPS Dynamic Pressure Sensing Technology® System, to meet the needs of various subcutaneous drug delivery injections and fluid aspiration – enabling healthcare practitioners to achieve multiple unique benefits that cannot currently be accomplished with the 160-year-old manual syringe. The device, using The Wand®, a single use disposable handpiece, is marketed in dentistry under the trademark CompuDent®, and STA Single Tooth Anesthesia System® and is suitable for all dental procedures that require local anesthetic. The dental devices are sold in the United States, Canada and in 38 other countries. Milestone Scientific also has 510(k) marketing clearance from the U.S. Food and Drug Administration (FDA) on the CompuFlo® Epidural Computer Controlled Anesthesia System in the lumbar spine region. In addition, certain medical devices have obtained CE mark approval and can be marketed and sold in most European countries.

Milestone Scientific is a biomedical technology research and development company that patents, designs, develops and commercializes innovative diagnostic and therapeutic injection technologies and devices for medical, and dental Since our inception, we have engaged in pioneering proprietary, innovative, computer-controlled injection technologies, and solutions for the medical and dental markets. We believe our technologies are proven and well established. Our common stock was initially listed on the NYSE American on June 1, 2015 and trades under the symbol “MLSS”. The Company is focused on building its intellectual; property portfolio across numerous indications.

The recent receipt of chronology-Specific CPT Code for the Company's technology by the American Medical Association marks an important milestone, that could increase the potential number of anesthesia pain management clinics adopting the CompuFlo instrument. A CPT code expands the potential for reimbursement of epidural procedures in pain management utilizing the CompuFlo Epidural System., which should help accelerate the commercial roll-out of CompuFlo in the U.S.

DPS Dynamic Pressure Sensing Technology; Our Proprietary Core Technology Platform

Given our experience and established brand awareness within the dental industry beginning with our first commercial product, the first computer-controlled local anesthesia delivery (C-CLAD) system marketed as the Wand® and re-branded as the CompuDent® System, now the market leader in dental injection technology, we elected to focus our product development efforts on improving the patient experience and making the device more versatile and precise for the practitioner.

Our next significant intellectual property advancement was a improvement over our CompuDent® System – the development of our proprietary CompuFlo® Computer-Controlled Drug Delivery System with DPS Dynamic Pressure Sensing Technology, an advanced and FDA-approved technology for the painless and accurate delivery of drugs, anesthetics, and other medicaments into all tissue types, as well as for the aspiration of bodily fluids or previously injected substances. Its regulation and control of the flow rate continues to provide painless delivery benefits, while its innovative dynamic pressure sensing capability provides visual and audible in-tissue pressure feedback, identifying tissue types to the healthcare provider. This pressure feedback extends the benefit of painlessness from anesthetics with known viscosities to a wide range of liquid drugs and other medicaments with varying viscosities and flow rates. Such pressure feedback, part of our DPS Dynamic Pressure Sensing Technology, also allows the healthcare provider to know when certain types of tissues have been penetrated and permits the healthcare provider to inject medicaments precisely at the desired location. Thus, real-time continuous pressure feedback can prevent the injection to tissue outside the intended target area, an important characteristic in the injection of chemotherapeutics and other toxic substances.

In addition to the ability to determine exit pressure in-situ (in the injection site tissue) at the tip of the needle, minimizing tissue damage (and eliminating the pain of the injection) because the flow rate and pressure of the injection are precisely controlled, CompuFlo® computer-controlled Drug Delivery Systems features a proprietary algorithm, which allow for the measurement of the exit pressure. These algorithms contain the critical components of specific drugs, parameters of needles, tubing and syringes and all other pertinent components for the safe and efficacious delivery of medications for all procedures. CompuFlo®technology also enables devices to provide a digital record of the time and volume of anesthetic or medicament injected.

Each Wand/STA System also includes a disposable injection handpiece that is extremely comfortable, light, and easy to use, providing for precise tactile control during the injection, an electro-mechanical (computer-controlled) fluid delivery instrument and the ability to record data from the injection event. The pencil grip used with the handpieces provides the practitioner with enhanced tactile sense and accurate control and allows bi-directional rotation, eliminating needle deflection, resulting in a greater accuracy and success. The handpiece is vibration-free because it does not have a motor or electrical component in it and, since the handpiece does not look like a typical syringe, we believe it also reduces patient anxiety and offers the possibility of curing dental phobia of which an estimated 40 million Americans suffer.

As confirmed by numerous noted medical and dental experts within academia and the clinical practice arenas, CompuFlo Systems using DPS Dynamic Pressure Sensing technology have the potential to greatly increase the safety and efficacy of many drug delivery procedures that currently rely upon the over 160-year-old hypodermic syringe technology and the tactile senses and delivery expertise of the administrator.

Devices using DPS Dynamic Pressure Sensing Technology such as the CompuFlo System can be used to inject a wide variety of liquid medicaments as well as anesthetics. We believe our CompuFlo System avoids the negative side effects from the use of traditional hypodermic drug delivery injection devices, which are well documented in dental and medical literature and include risk of death, transient or permanent paralysis, pain, tissue damage and post-operative complications. Pain and tissue damage often result from uncontrolled flow rates and pressure created during the administration of drug solutions into human tissue. While several technologies can control the flow rate, we believe our patented DPS Dynamic Pressure Sensing technology and CompuFlo Systems provide the control of pressure during the injection as well accurately and precisely delivery the drug.

CompuFlo Epidural Computer Controlled Anesthesia System

The CompuFlo Epidural Computer Controlled Anesthesia System (or the CompuFlo Epidural System) is one such platform extension of our DPS Dynamic Pressure Sensing Technology platform, providing anesthesiologists and other healthcare providers the ability, for the first time, to quantitatively determine and document the pressure at the needle tip in real-time for proper needle placement in epidural procedures used for labor/delivery and back pain management. Our proprietary DPS Dynamic Pressure Sensing Technology allows the CompuFlo Epidural System to provide objective visual and audible in-tissue pressure feedback that allows anesthesiologists to identify and confirm placement in the epidural space.

Our CompuFlo Epidural System provides an objective tool that we believe consistently and accurately identifies the epidural space by detecting the difference in pressure between the ligamentum flavum and the intrafilamentary tissue. In studies, the CompuFlo Epidural Systemwith DPS Dynamic Pressure Sensing Technology has been shown to be effective in correctly identifying the epidural space. Knowing the precise location of a needle tip during an epidural injection procedure provides a measure of safety not presently available to doctors using conventional syringes. In the absence of fluoroscopy, identifying the epidural space by relying on the subjective perception of loss of resistance to saline requires a very long education period and learning curve and could result in morbidity and lack of efficacy. During back pain management epidural procedures, where fluoroscopy is commonly used, the CompuFlo Epidural System allows the clinician to locate the epidural space, without using fluoroscopy, thereby protecting the patient and clinician from unnecessary exposure to radiation along with significantly reducing capital and operating costs.

Wand/STA Dental Product

Since its market introduction in early 2007, the Wand STA System and prior C-CLAD devices have been used to deliver over 80 million safe, effective, and comfortable injections. The instrument has also been favorably evaluated in numerous peer-reviewed, published clinical studies and associated articles. Moreover, there appears to be a growing consensus among users that the STA Instrument is proving to be a valuable and beneficial instrument that is positively impacting the practice of dentistry worldwide.

Medical Market Product

During 2016, Milestone Scientific filed for 510(k) marketing clearance with the U.S. Food and Drug Administration (FDA) for both intra-articular and epidural injections with the CompuFlo Epidural System. In June 2017, the FDA approved the CompuFlo Epidural System for epidural injections.

In addition, the recent receipt of chronology-Specific CPT Code for the Company's technology by American Medical Association marks an important milestone, that could increase the potential number of anesthesia pain management clinics adopting the CompuFlo instrument. A CPT code expands the potential for reimbursement of epidural procedures in pain management utilizing the CompuFlo Epidural System., thereby helping accelerate the commercial roll-out of CompuFlo in the U.S.

Cosmetic Botulinum Product

Milestone Advanced Cosmetic Systems, Inc. (“Advanced Cosmetic Systems”), was originally owned 50% by us and 50% by Milestone China Company Limited (“Milestone China”), a company organized under the laws of Hong Kong and initially owned 40% by Milestone Scientific. Milestone China contributed $900,000 of cash to the joint venture, and we have provided a royalty-free license to utilize our technology to the joint venture to develop a botulinum toxin injection device.

In November 2017, we announced plans for the commercial launch of our proprietary cosmetic injection device using our DPS Dynamic Pressure Sensing technology platform and our CompuFlo Cosmetic System for delivery of botulinum toxin. Our proprietary cosmetic injection device features improved needle placement with a comfortable stylus grip, precise dosing, the same technology platform that has made dental and epidural injections painless, and a new, intuitive touch-screen interface. Although the Company received positive outcomes of multi-state human factor studies with targeted customers, the Company did not have the necessary capital to move forward with the commercial launch of our cosmetic device and apply for marketing clearance in Europe (CE clearance), and United States (FDA clearance).

OtherPossible Products

The Company is reviewing using CompuFlo’s DPS Dynamic Pressure Sensing Technology for less painful injections for use in rhinoplasty, colorectal surgery, podiatry, and other disciplines. In the self-injectable market, there are many injectable drugs routinely self-administered in a home or office setting using spring loaded automatic injection devices by people who suffer from long-term chronic conditions such as multiple sclerosis, rheumatoid arthritis, and other diseases of the auto immune system. We believe CompuFlo’s DPS Dynamic Pressure Sensing Technology, using pressure sensing capabilities, can serve as a less painless subcutaneous injection method for these self-administered drugs. However, there can be no assurance that we will be able to successfully develop any such products, or that if developed, that we will be able to obtain FDA approval to market any such products, or even if we do obtain such FDA approval, that any such products will generate any revenue for us or be a commercial success.

Ukraine

Sanctions imposed by the United States and other western democracies, because of the Ukrainian-Russian conflict, and any expansion thereof, is likely to have unpredictable and wide-ranging effects on the domestic and global economy and financial markets, which could have an adverse effect on our business and results of operations. As direct impact from the conflict, we have experienced a decrease in international sales to Ukraine and halted all sales to Russia. We will continue to monitor the situation carefully and, if necessary, take action to protect our business, operations, and financial condition.

COVID-19 Pandemic

The COVID-19 pandemic materially adversely affected the Company’s financial results and business operations during 2021. During the year 2022, the demand increased, and recovery of the dental business was seen, however, it is unclear what the effect other possible variants might have on the business during 2023. Therefore, such increased demand may or may not continue and/or demand may or may not increase from historical levels depending on the duration and severity of the COVID-19 pandemic, the transmissibility and severity of variants, the effectiveness of the on-going vaccination process, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties. Such events may result in business and manufacturing disruption, inventory shortages, delivery delays, and reduced sales and operations, any of which could materially affect our business, financial condition, and results of operations.

However, there can be no assurance that we will be able to successfully develop any such products, or that if developed, that we will be able to obtain FDA approval to market any such products, or even if we do obtain such FDA approval, that any such products will generate any revenue for us or be a commercial success.

The Company’s employees have been and are being affected by the COVID-19 pandemic. The health of the Company’s workforce is of primary concern and the Company may need to enact further precautionary measures to help minimize the risk of our employees being exposed to the coronavirus. Further, our management team is focused on mitigating the adverse effects of the COVID-19 pandemic. If these conditions worsen, the Company’s ability to manage its business may be impaired, and operational risks, cybersecurity risks and other risks facing the Company prior to the pandemic may be elevated. The COVID-19 pandemic is affecting the Company’s customers, suppliers, vendors, and other business partners, but the Company is not able to predict the ultimate consequences that will result therefrom.

We are experiencing supply delays and shortages due to the disruptions the ongoing COVID-19 pandemic is having on the global supply chain, especially with respect to goods from China. The ongoing COVID-19 pandemic has resulted in significant disruption to the operations of certain suppliers in China and the related transportation of their goods to the United States that are parts of our global supply chain. We have been able to make alternative delivery arrangements for limited quantities of goods, at increased cost. While we have not yet experienced material shortages in supply because of these disruptions and our alternative delivery arrangements, if they were to be prolonged or expanded in scope, there could be resulting supply shortages which could impact our ability to have manufactured and delivered our products to the United States and, ultimately to our customers. Accordingly, such supply shortages and delivery limitations could have a material adverse effect on our business, financial condition, results of operations, and cash flows. All of these factors may have far reaching impacts on the Company’s business, operations, and financial results and conditions, directly and indirectly, including without limitation impacts on the health of the Company’s management.

Patents and Intellectual Property

Milestone Scientific and its subsidiaries currently hold approxi

mately 216 U.S. and foreign patents, and many patent applications. The Company’s patents and patent applications relate to drug delivery methodologies, drug flow rate measurement, pressure/force computer-controlled drug delivery with exit pressure, dynamic pressure sensing, automated rate control, automated charging, drug profiles, audible and visual pressure/force feedback, tissue identification, drug delivery injection unit, drug drive unit for anesthetic, handpiece, and injection device. Milestone Scientific and its subsidiaries also currently hold approximately 36 registered U.S. and foreign trademarks, including

CompuDent®

, CompuFlo®

, DPS Dynamic Pressure Sensing technology®

, Safety Wand®

, STA Single Tooth Anesthesia System®

, and

The Wand®

Milestone Scientific relies on a combination of patent, copyright, trade secret and trademark laws and employee and third-party non-disclosure agreements to protect its intellectual property rights. Despite the precautions taken by Milestone Scientific to protect its IP rights, unauthorized parties may attempt to reverse engineer, copy, or obtain and use products and information that Milestone Scientific regards as proprietary, or may design products serving similar purposes that do not infringe on Milestone Scientific’s patents. Milestone Scientific’s failure to protect its proprietary information and the expenses of doing so could have a material adverse effect on our business, financial condition, and results of operations.

If Milestone Scientific’s products infringe upon patent or proprietary rights of others, we may be required to modify processes or to obtain licenses. There can be no assurance that Milestone Scientific would be able to do so in a timely manner, upon acceptable terms and conditions, or at all. The failure to do so could have a material adverse effect on our business, financial condition, and results of operations.

Manufacturing

Milestone Scientific has informal arrangements with an U.S. manufacturer of the Wand/STA System, and epidural devices. Pursuant to these informal arrangements, our third-party manufacturer manufactures the Wand/STA System under specific purchase orders without minimum purchase commitments, and at prices to be agreed upon in each such purchase order.

Our agreement with the principal manufacturer of dental handpieces includes pricing terms. Milestone Scientific has been supplied by the manufacturer of the Wand/STA System and its predecessor, the CompuDent System, since the commencement of production in 1998, and by the manufacturer of its dental handpieces since 2003. The manufacturer of our dental handpieces is in the People’s Republic of China and the manufacturer of the Wand/STA System is in the United States. Refer to Item 1A. Risk Factors.

Changes to pricing of the Wand/STA System instruments by the manufacturer could have a material adverse effect on our financial condition, business, and results of operations. Termination of the manufacturing relationship with any of these third-party manufacturers could significantly and adversely affect our ability to produce and sell the products.

Though other alternate sources of supply for dental handpieces exist, Milestone Scientific would need to establish relationships with new suppliers, and with respect to the Wand/STA System recover its existing tools or have new tools produced and “burn in” and other manufacturing and quality control software re-produced. Establishing new manufacturing relationships could involve significant expense and delay. Any curtailment or interruptions of supply, whether as a result of the inability of a supplier to meet our product delivery needs or termination of the relationship, would have a material adverse effect on our financial condition, business, and results of operations.

Distribution and Marketing

Dental Products

The Company has used a combination of exclusive and non-exclusive distributors to sell its dental products. In the United States and Canada the Company’s largest distributor was Henry Schein, Inc. (“Henry Schein”). In December 2021, Henry Schein’s exclusive distribution arrangement with respect to the Wand STA System became a non-exclusive distribution arrangement for the United States and Canada, and on December 31, 2022 such non-exclusive distribution arrangement terminated.

In anticipation of such termination, 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. As of December 31, 2022, there are twelve new non-exclusive dental distributors engaged in the United States and Canada. In addition, the Company developed its own United States direct distribution channel which was launched in January of 2023.

On the global front, we have granted exclusive marketing and distribution rights for the Wand STA System to select dental suppliers in various international regions in Asia, Africa, South America, and Europe. Additionally, the Company is in the process of evaluating current international distributors and adding new distributors globally as required based on the economics of the region.

Medical Product

The company, markets and sell it’s medical products in the international markets such as Italy, Switzerland, Greece, Canada and the Middle East through exclusive distributors. In the United States the Medical products are sold by a direct sales team of 3 full time employees and CTI a medical distributor covering 22 states.

Competition

As of this filing, there is no subcutaneous drug delivery platform or device on the market regulating the flow rate and pressure of an injection capable of delivering a painless injection at the desired location like Milestone Scientific’s proprietary, patented devices having our DPS Dynamic Pressure Sensing technology.

Milestone Scientific’s devices compete based on their performance characteristics and the benefits provided to the patient, practitioner, and their business operations. Clinical studies have shown that our devices reduce fear, pain and anxiety for many patients, and Milestone Scientific believes that they can reduce practitioner stress levels, as well. Other computer-controlled local anesthesia delivery (C-CLAD) options are the Quicksleeper and SleeperOne, from Dental Hi Tec, Dentapen from Septodant, the Calajet from Aseptico, and the Comfort Control Syringe by Dentsply. In the medical segment, for needle verification and placement the EpiFaith Syringe made its market entry in 2023.

The Quicksleeper was invented in France by Dr. Alain Villette in 1991. It is marketed as the only local anesthetic delivery device in France that allows the ability to perform all intraoral local anesthetic injection techniques, including osteocentral anesthesia, quickly and without failure. The extra feature that gives the Quicksleeper this ability is a built-in motor in the syringe/handpiece that renders the syringe both an injector and a perforator of bone. That is, the handpiece of the Quicksleeper can perform an intraosseous injection via a motor driven perforation of the cortical plate of bone. A standard dental needle that attaches to the syringe spins as the motor rotates the handpiece thus acting as a perforator. However, the handpiece is relatively heavy, weighing 240 g. as compared to a standard syringe that weighs 80 g. Injection speed increases during the injection, but the operator cannot control when the injection speed increases.

The Calajet instrument, manufactured in Europe, has been very slow to grow market acceptance. It recently began marketing in the United States with similar slow acceptance. The instrument is a higher price than the Wand STA and does not provide dynamic pressure sensing technology. Although a competitor, we believe that without a substantial distribution network this instrument will have a difficult time to be successful in the United States.

The Dentapen from Septodent is the newest competitor in the market. This device is manufactured in Europe and began marketing in the United States in 2018. This device is priced similar to the Wand/STA device, but at this time, to our knowledge, it has been slow to attract viable distribution in the United States.

The EpiFaith Syringe claims to assist the physicians in entering the epidural space. The instrument is introduced at a lower price. Although a potential competitor, we believe that our technology is well documented and is the only pressure sensor guidance system for epidural analgesia assisting the physician over the entire trajectory of epidural needle placement and catheter verification.

Milestone Scientific’s proprietary, patented devices with its DPS Dynamic Pressure Sensing Technology platform also compete with disposable and reusable syringes that generally sell at lower prices and that use established and well-understood methodologies in both the dental and medical marketplaces.

Rapid technological change and research may affect our products. Current or new competitors could, at any time, introduce new or enhanced products with features that render our products less marketable or even obsolete. Therefore, Milestone Scientific must devote substantial efforts and financial resources to improve existing products, bring products to market quickly, and develop new products for related markets. In addition, the ability to compete successfully requires that Milestone Scientific maintain an effective distribution network with a strong marketing plan. Any new products must comply with applicable regulatory authorities before they may be marketed. Milestone Scientific cannot assure that it can compete successfully, that competitors will not develop technologies or products that render our products less marketable or obsolete, or, that Milestone Scientific will succeed in improving its existing products, effectively develop new products, or obtain required regulatory approval for those products.

Government Regulation

The manufacture and sale of medical devices and other medical products are subject to extensive regulation by the Food and Drug Administration ("FDA") pursuant to the U.S. Food, Drug and Cosmetic Act (“FD&C Act”), and by other federal, state, and foreign authorities. Under the FD&C Act, medical devices must receive FDA clearance before they can be marketed commercially in the United States. Some medical products must undergo rigorous pre-clinical and clinical testing and an extensive FDA approval process before they can be marketed.

These processes can take many years and require the expenditure of substantial resources. The time required for completing such testing and obtaining such approvals is uncertain, and FDA clearance may never be obtained. Delays or rejections may be encountered based upon changes in FDA policy during the period of product development and FDA regulatory review of each product submitted. Similar delays also may be encountered in other countries. Following the enactment of the Medical Device Amendments to the U.S. Food, Drug and Cosmetic Act in May 1976, the FDA classified medical devices in commercial distribution into one of three classes. This classification is based on the controls necessary to reasonably ensure the safety and effectiveness of the medical devices. Class I devices are those devices whose safety and effectiveness can reasonably be ensured through general controls, such as adequate labeling, pre-market notification, and adherence to the FDA’s Quality System Regulation (“QSR”), also referred to as “Good Manufacturing Practices” (“GMP”) regulations. Some Class I devices are further exempted from some of the general controls. Class II devices are those devices whose safety and effectiveness reasonably can be ensured using special controls, such as performance standards, post-market surveillance, patient registries, and FDA guidelines. Class III devices are those which must receive pre-market approval by the FDA to ensure their safety and effectiveness. Generally, Class III devices are limited to life-sustaining, life-supporting or implantable devices.

Prior to Pre-market Notification clearance, the manufacturer or distributor may not place the device into commercial distribution until an order is issued by the FDA. By regulation, the FDA has no specific time limit by which it must respond to a 510(k) Pre-market Notification. Currently, the FDA typically responds to the submission of a 510(k) Pre-market Notification within 180 days. The FDA response may declare that the device is substantially equivalent to another legally marketed device and allow the proposed device to be marketed in the United States. However, the FDA may determine that the proposed device is not substantially equivalent or may require further information, such as additional test data, before the FDA is able to decide regarding substantial equivalence. Such determination or request for additional information could delay market introduction of products. If a device that has obtained 510(k) Pre-market Notification clearance is changed or modified in design, components, method of manufacture, or intended use, such that the safety or effectiveness of the device could be significantly affected, separate 510(k) Pre-market notification clearance must be obtained before the modified device can be marketed in the United States. If a manufacturer or distributor cannot establish that a proposed device is substantially equivalent to a legally marketed device, the manufacturer or distributor will have to seek pre-market approval of the proposed device, a more difficult procedure requiring extensive data, including pre-clinical and human clinical trial data, as well as extensive literature to prove the safety and efficacy of the device.

The FDA cleared the Wand, our CompuDent System, and its disposable handpieces, for marketing in the United States for dental applications in July 1996; the CompuMed® System for marketing in the United States for medical applications in May 2001; the Safety Wand® for marketing in the United States for dental applications in September 2003; the Wand/STA System for dental applications in August 2006; and our CompuFlo Epidural System in June 2017.

For us to commercialize other products in the United States, Milestone Scientific would have to submit and have cleared additional 510(k) applications to the FDA. In 2017, the FDA reduced the barrier to marketing clearance for certain dental devices. As a result, other manufacturers of injection devices could more easily enter the dental market. However, we believe that any new device will be very limited in sales volume without a significant distributor in the dental market.

Though certain dental and medical devices have received FDA marketing clearance, there can be no assurance that any of the other medical devices under development will obtain the required regulatory clearance in a timely manner, or at all. If regulatory clearance of a product is granted, such clearance may entail limitations on the indicated uses for which the product may be marketed. In addition, modifications may be made to the products to incorporate and enhance their functionality and performance based upon new data and design review. There can be no assurance that the FDA will not request additional information relating to product improvements; that any such improvements would not require further regulatory review, thereby delaying the testing, approval, and commercialization of product improvements; or that ultimately any such improvements will receive FDA clearance.

Compliance with applicable regulatory requirements is subject to continual review and is monitored through periodic inspections by the FDA. Later discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions on such product or manufacturer, including fines, delays or suspensions of regulatory clearances, seizures or recalls of products, operating restrictions, and criminal prosecution.

Milestone Scientific is subject to pervasive and continuing regulation by the FDA, whose regulations require manufacturers of medical devices to adhere to certain QSR requirements as defined by the FD&C Act. QSR compliance requires testing, quality control and documentation procedures. Failure to comply with QSR requirements can result in the suspension or termination of production, product recall or fines and penalties. Products also must be manufactured in registered establishments. In addition, labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. The export of devices is also subject to regulation in certain instances.

The Medical Device Reporting (“MDR”) regulation obligates us to provide information to the FDA on product malfunctions or injuries alleged to have been associated with the use of the product or in connection with certain product failures that could cause serious injury. If, because of FDA inspections, MDR reports or other information, the FDA believes that Milestone Scientific is not in compliance with the law, the FDA can institute proceedings to detain or seize products, enjoin future violations, or assess civil and/or criminal penalties against us, our officers, or employees. Any action by the FDA could result in disruption of operations for an undetermined amount of time.

In May 2022, the Company initiated a Corrective Action Preventative Action (CAPA) investigation of the Epidural Disposable Kit, Part # 6100-01, lot HC 51, the scope of the voluntary market withdrawal needed to be expanded to include Part # 6100-03, lot HC 50. A new non-conformance was initiated, and Lot HC 50 was added to the scope of the CAPA initiated above. The investigation via the CAPA identified that there is an issue with the id adaptors used in both lot’s HC 51 and HC 50. However, the Health Hazard Evaluation shows that there is no risk to the patient or the user, thus management has determined there are no potential impacts to patients or users. Lot’s HC 51 and HC 50 are worth approximately $22,000 and $10,000 respectively. Management has determined that no other lots were affected.

In May 2022, the Company was notified that Wand STA handpieces, reference # STA—5050-2725, lot B210113 were packaged incorrectly. The Company initiated a Corrective Action Preventative Action (CAPA) investigation to determine the root cause and implement corrective actions. The Health Hazard Evaluation was completed and showed that there is no risk to the patient or the user due to this discrepancy, thus management has determined there are no potential impacts to patients or users. However, to provide the highest quality products to the market, Milestone Scientific decided to initiate a voluntary market withdrawal on May 13, 2022. Lot B210113 is worth approximately $25,000.

Human Capital

The Company has a total 20 full-time employees, including two executive officers. Milestone Scientific also has a consultant who serves as a Director of Clinical Affairs. None of our employees are subject to a collective bargaining agreement and we believe our employee relations are

good.

Corporate Information

We were organized in August 1989 under the laws of the State of Delaware. Our principal executive office is located at 425 Eagle Rock Avenue, Roseland, New Jersey 07068. Our telephone number is (973) 535-2717.

Item 1A. Risk Factors

You should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. The risks described below are not the only risks facing us. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, results of operations and/or prospects.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant losses since our inception. These operating losses are expected to continue, and we are unable to predict the extent of future losses, whether we will generate significant revenues or whether we will achieve or sustain profitability.

We are a small, non-diversified medical device company with a history of limited revenue and significant operating losses and our prospects must be evaluated considering the uncertainties, risks, expenses, and difficulties frequently encountered by similarly situated companies. The Company has generated net losses in all periods since the commencement of our operations. The operating losses were $8.8 million and $7.4 million, for the years ended December 31, 2022, and 2021, respectively.

We expect to make substantial expenditures and incur increasing operating costs in the future and our accumulated deficit will increase significantly as we undertake to commercialize our CompuFlo Epidural System. Our losses have had, and are expected to continue to have, an adverse impact on our working capital, total assets, and stockholders' equity. Because of the risks and uncertainties associated with product acceptance, we are unable to predict the extent of any future losses, whether we will ever generate significant revenues or if we will ever achieve or sustain profitability. Even if we do generate profits from operations, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to generate profits from operations, and to become and remain profitable, could impair our ability to raise capital, expand our business, and maintain our commercial efforts or continue our operations. A decline in the value of our company could also cause our shareholders to lose all or part of their investment

We may require additional funding and may be unable to raise capital when needed, which may force us to delay, curtail or eliminate commercialization efforts of our CompuFlo Epidural Computer Controlled Anesthesia System.

Our operations have consumed substantial amounts of cash since inception. During the years ended December 31, 2022 and 2021, net cash flow used in operations was approximately $6.0 million and approximately $4.0 million, respectively. We expect to continue to spend substantial amounts on commercialization and marketing activities, including the continued commercialization and marketing of our FDA-approved CompuFlo Epidural Computer Controlled Anesthesia System. Until such time, if ever, as we can generate a sufficient amount of product revenue and achieve positive cash flow, we expect to seek to finance future cash needs through equity financings or corporate collaboration and licensing arrangements and may seek the sale of non-medical assets.

Sales of a substantial number of shares of our common stock, or the perception that such sales may occur, may adversely impact the price of our common stock.

Almost all our 69,306,497 outstanding shares of common stock on December 31, 2022, as well as a substantial number of shares of our common stock underlying outstanding warrants, are available for sale in the public market, either freely or pursuant to Rule 144 under the Securities Act of 1933, as amended. Sales of a substantial number of shares of our common stock, or the perception that such sales may occur, may adversely impact the price of our common stock.

Raising additional capital by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations, or require us to relinquish proprietary rights.

To the extent that we raise additional capital by issuing equity securities, the share ownership of existing stockholders will be diluted. Any future debt financing may involve covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments, and engage in certain merger, consolidation, or asset sale transactions, among other restrictions. In addition, if we raise additional funds through licensing arrangements or the disposition of any of our assets, it may be necessary to relinquish potentially valuable rights to our product candidates or grant licenses on terms that are not favorable to us.

Recent developments in financial institutions could adversely affect our current and projected business operations, financial condition and results of operations.

Recent events involving limited liquidity, defaults, non-performance and other adverse developments that affect financial institutions have led to market-wide liquidity concerns. For example, on March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation, or FDIC, as receiver. On March 12, 2023, Signature Bank and Silvergate Capital Corp. were also placed into receivership. Future increases of the borrowing rate by the Federal Reserve Board, to slow inflation or for other reasons, may expose other financial institutions to greater interest rate risk and exacerbate liquidity and other adverse developments affecting such institutions.

The Company currently keeps more than $250,000, the maximum amount insured by the Federal Deposit Insurance Corporation (“FDIC”), in its current bank depositary. The Company may experience delayed access or a loss of its uninsured deposits or other financial assets should its existing financial institution experience financial distress. While the U.S. Department of Treasury, FDIC and Federal Reserve Board have provided access to uninsured funds in connection with the Silicon Valley Bank crisis, there is no guarantee that these institutions will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion. The Company is currently evaluating its banking relationships with the intent of increasing the amount of deposits that are fully insured or invested in risk free instruments.

The results of events or concerns that involve non-performance by financial institutions could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. In addition, any further deterioration in the macroeconomic economy or financial services industry, or delayed access or loss of uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution by our customers or vendors, could lead to losses or defaults by companies with whom we do business, which in turn could have a material adverse effect on our current and/or projected business operations, results of operations and financial condition. In addition, other companies could be adversely affected by any of the liquidity or other risks that are described above as factors that could result in material adverse impacts on us, including but not limited to delayed access or loss of uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution.

Risks Related to Sales and Distribution of Milestone Scientific Products

Changes in our distribution arrangements exposes us to risks of interruption of marketing efforts and building new marketing channels.

Effective December 31, 2022, the Company's termination of its U.S. distribution agreement with Henry Schein became effective. The goal of changing our marketing plan from a sole exclusive distributor in the United States and Canada, to a large number of non-exclusive distributors and an e-commerce platform, may not be seamless or uninterrupted .

Returns under our Distribution and Supply Agreement with Henry Schein, Inc. could have a material adverse effect on our business, financial condition, and results of operations.

Under our Distribution and Supply Agreement with Henry Schein, Henry Schein has a right to return our products for full credit against the purchase price paid by them in accordance with such agreement, including but not limited to, returns due to shipment error by us or factory defect. On December 31, 2022, such non-exclusive distribution arrangement terminated, subject to certain post-termination rights and obligations of the parties, all in accordance with such agreement.

Milestone Scientific’s International Operations Subject it to Certain Business Risks.

A substantial amount of Milestone Scientific’s sales come from its operations outside the United States and we intend to continue to pursue growth opportunities outside of the United States. Milestone Scientific’s international operations subject it to certain risks relating to, among other things, fluctuations in foreign currency exchange, local economic and political conditions, competition from local companies, increases in trade protectionism, United States relations with the governments of the foreign countries in which Milestone Scientific operates, foreign regulatory requirements or changes in such requirements, changes in local healthcare payment systems and healthcare delivery systems, local product preferences and requirements, longer payment terms for account receivables than we experience in the United States, difficulty in establishing and managing foreign operations, weakening or loss of the protection of intellectual property rights in some countries and import or export licensing requirements.

We are exposed to the risks inherent in international sales.

In 2022, export sales outside of the United States made up approximately 63% of our total sales, and we sell our products to customers in approximately 30 countries and U.S. territories. We have exposure to risks of operating in many foreign countries, including:

● unexpected changes in political or regulatory environments;

● political and economic instability;

● import and export restrictions and other trade barriers; and

● difficulties in obtaining approval for significant transactions.

If physicians do not accept nor use our CompuFlo Epidural System, our ability to generate revenue from sales will be materially impaired.

Although the FDA has cleared our application to begin marketing the CompuFlo Epidural System, this is no assurance that physicians, hospitals, clinics, and other health care providers will accept and use it. Acceptance and use of the CompuFlo Epidural System will depend on many factors including:

● cost-effectiveness of our product relative to competing products and systems;

● patient satisfaction;

Because we expect sales of the CompuFlo Epidural Computer Controlled Anesthesia System to generate substantially all our medical product revenues in the near-term, the failure of this product to find market acceptance would harm our business and could require us to seek additional financing or make such financing difficult to obtain on favorable terms, if at all.

Milestone Scientific’s sales and marketing efforts rely upon independent distributors that are free to market products that compete with Milestone Scientific’s products, and if Milestone Scientific is unable to maintain or expand its network of independent distributors, its business could be materially adversely affected.

Milestone Scientific believes that a significant portion of its sales will continue to be to independent distributors for the foreseeable future, and it is possible that the percentage of its sales to independent distributors could increase. None of Milestone Scientific’s independent distributors in the United States have been required to sell Milestone Scientific products exclusively, and each of them may freely sell the products of Milestone Scientific’s competitors. If Milestone Scientific is unable to maintain or expand its network of independent distributors, its sales may be negatively affected. If any of its key independent distributors were to cease to distribute Milestone Scientific’s products or reduce their promotion of such products as compared to the products of Milestone Scientific’s competitors, Milestone Scientific may need to seek alternative independent distributors or increase its reliance on other independent distributors which alternative arrangements may not be sufficient to prevent a material reduction in sales of its products.

Developments by competitors may render our products or technologies obsolete or non-competitive.

The medical device industry is intensely competitive and subject to rapid and significant technological change. We expect that other companies (or individuals), whether located in the United States or abroad, will pursue the development of alternative injection-based or imaging-based systems that will compete with our products. Many of these potential competitors have substantially greater capital resources, larger research and development staffs and facilities, longer product development history in obtaining regulatory approvals and greater manufacturing and marketing capabilities than we do. These companies also compete with us to attract qualified personnel and parties for acquisitions, joint ventures, or other collaborations. As a result, we may not be able to compete effectively against these companies or their products.

Our ability to commercialize our products will depend in part on the extent to which reimbursement will be available from governmental agencies, health administration authorities, private health maintenance organizations and health insurers and other healthcare payers.

Our ability to generate revenues from our products will be diminished if the products sell for inadequate prices or hospitals or physicians are unable to obtain adequate levels of reimbursement for the cost they incur in connection with the use of the product. Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Healthcare payers, including Medicare, are challenging the prices charged for medical products and services. Government and other healthcare payers increasingly attempt to contain healthcare costs by limiting both coverage and the level of reimbursement for products. Insurance coverage may not be available, or reimbursement levels may be inadequate, to cover the charges for the use of such product. If government and other healthcare payers do not provide adequate coverage and reimbursement for any of our products, market acceptance of such product could be reduced.

Prices in many countries, including many in Europe, are subject to local regulation and price controls. In the United States, where pricing levels for medical products, procedures and services are substantially established by third-party payors, including Medicare, if payors reduce the amount of reimbursement for a product, it may cause groups or individuals dispensing the product to discontinue use of the product, to substitute lower cost products even if the alternatives are less effective or to seek additional price-related concessions. These actions could have a negative effect on our financial results. The existence of direct and indirect price controls and pressures on our products could materially adversely affect our financial prospects and performance.

We could lose our market advantage earlier than expected.

We believe that our products represent a significant improvement over any existing drug delivery injection system in use today. However, this competitive advantage can evaporate quickly if we are not able to commercialize our products quickly. In the medical device industry, the majority of an innovative product’s commercial value is realized during the early stages of commercialization, before competing products are developed. Our market advantage is based, in part, on patent rights and the need for new competing products and systems to obtain regulatory approval before they can be commercialized. The scope of our patent rights may be limited and may also depend on the availability of meaningful legal remedies.

Our failure to adequately protect our intellectual property rights, through patents or otherwise, or limitations on the use or loss of such rights, could have a material adverse effect on our ability to prevent the commercialization of competing anesthetic delivery systems. In some countries, basic patent protections for our products may not exist because certain countries did not historically offer the right to obtain specific types of patents and/or we (or our licensors) did not file in those markets. In addition, the patent environment can be unpredictable, and the validity and enforceability of patents cannot be predicted with certainty.

Risks Related to the Covid-19 Pandemic

The COVID-19 pandemic has and may continue to adversely affect the Company’s business. Additional factors could exacerbate such negative consequences and/or cause other materially adverse effects.

Certain COVID-19 pandemic-related impacts were experienced by our businesses during 2022 and may continue for an indeterminable period. These included supply chain delays for some of our products which are manufactured in China and supply shortages in key components in our dental products. Future resurgences in COVID-19 infections or other new viral outbreaks may affect the prioritization of non-acute versus acute healthcare utilization, which may temporarily weaken future demand for certain of our products and increase the demand for other of our products. Also, adverse macroeconomic conditions may worsen if governments impose future restrictions, such as lockdowns or quarantine requirements, in order to control infection rates associated with COVID-19 or other viruses.

Additionally, the pandemic escalated challenges that existed for global healthcare systems prior to the pandemic, including budget constraints and staffing shortages, particularly shortages of nursing staff. Changes in the ways healthcare services are delivered, including the transition of more care from acute to non-acute settings and increased focus on chronic disease management, may place additional financial pressure on hospitals and the broader healthcare system. Healthcare institutions may take actions to mitigate any persistent pressures on their budgets and such actions could impact the future demand for our products.

We are experiencing supply delays and shortages due to the disruptions the ongoing COVID-19 pandemic is having on the global supply chain, especially with respect to goods from China.

We are experiencing supply delays and shortages due to the disruptions the ongoing COVID-19 pandemic is having on the global supply chain, especially with respect to goods from China. The ongoing COVID-19 pandemic has resulted in significant disruption to the operations of certain suppliers in China and the related transportation of their goods to the United States that are parts of our global supply chain. We have been able to make alternative delivery arrangements for limited quantities of goods, at an increased cost. While we have not yet experienced material shortages in supply as a result of these disruptions and our alternative delivery arrangements, if they were to be prolonged or expanded in scope, there could be resulting supply shortages which could impact our ability to have manufactured and delivered our products to the United States and, ultimately to our customers. Accordingly, such supply shortages and delivery limitations could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Risks Related to Employee Matters

We may not be able to attract and retain qualified employees.

Our future success depends upon the continued service of our executive officer and other key management and technical personnel, and on our ability to continue to identify, attract, retain, and motivate them. Implementing our business strategy requires specialized territory managers and other talent, as our revenues are highly dependent on technological and product innovations. The market for employees in our industry is extremely competitive, a number of such competitors are significantly larger than us and are able to offer compensation in excess of what we are able to offer. If we are unable to attract and retain qualified employees, our business may be harmed.

Risk Related to Our Dependence on Third Parties

Relying exclusively on third parties to manufacture our products, changes in our informal manufacturing arrangements made by the manufacturer of our products and disruptions at the manufacturing facility of our manufacturers and failure to maintain existing supply relationships exposes us to risks that may harm our business.

We have limited internal experience in manufacturing operations and have not historically established our own manufacturing facilities. We currently lack the internal resources to manufacture any of our products, including our CompuFlo® Epidural Computer Controlled Anesthesia System.

Milestone Scientific has been supplied by the manufacturer of the Wand/STA System and its predecessor, the CompuDent System, since the commencement of production in 1998, and by the manufacturer of its handpieces since 2003. The manufacturer of our handpieces is in the People’s Republic of China and the manufacturer of the Wand/STA System is in the United States. At present, we have an informal arrangement with the manufacturers of our products. Our current arrangement with our manufacturers is on a purchase order-by-purchase order basis. As a result, we do not have price protection or a supply commitment for our devices or handpieces. If either manufacturer insists on a material change in terms or determines to discontinue manufacture of our products, it could have an adverse effect on our financial condition and results of operation.

An operational disruption in the facility of the manufacturer of, or their ability to ship, our handpieces or devices could negatively impact our financial results. The occurrence of a natural disaster, such as a hurricane, tropical storm, earthquake, tornado, severe weather, flood, fire, or epidemic, pandemic, or other health emergency, or other unanticipated problems such as labor difficulties, equipment failure or unscheduled maintenance, in each case could cause operational disruptions of varied duration.

These types of disruptions could materially adversely affect our financial condition and results of operations to varying degrees dependent upon the facility, the duration of the disruption, our ability to shift business to another facility or find alternative sources of supply. Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles. Given our current manufacturing relationships, it is possible that our manufacturing requirements may exceed the available supply allotments under our existing agreements. Our anticipated future reliance on third-party manufacturers exposes us to the following additional risks:

Each of these risks could delay the commercialization of our CompuFlo Epidural Computer Controlled Anesthesia System, limit our available supply of The Wand/ STA for dental applications, cause damage to our reputation, result in higher costs and/or deprive us of potential product revenues. Any curtailment or interruptions of the supply, whether as a result of termination of the relationship or otherwise, would have a material adverse effect on our financial condition, business, and results of operations.

Our business is exposed to risks associated with the economic, environmental, and political conditions in China because the sole manufacturer of our handpieces is located in China.

Because the sole manufacturer of our dental handpieces is located in China, our business is disproportionately exposed to the economic, environmental, and political conditions of the region. China’s political and economic systems are very different from most developed countries in many respects, including, the amount of government involvement, the level of development, the control of foreign exchange and the allocation of resources. Uncertainties may arise with changing governmental policies and measures. China also faces many social, economic, and political challenges that may produce instabilities in both its domestic arena and in its relationship with other countries.

These instabilities may significantly and adversely affect our supply of dental handpieces which would in turn adversely affect our financial performance. In addition, as the Chinese legal system develops, there can be no assurance that changes in laws and regulations and their interpretation or their enforcement will not have a material adverse effect on our business relationship with the sole manufacturer of our dental handpieces. Any adverse change in the economic, environmental, and political conditions in China could have a material adverse effect on economic growth and the level of investments and availability of capital in China, which in turn could lead to a reduction in the supply of our dental handpieces and consequently have a material adverse effect on our businesses.

Issues with product quality could have a material adverse effect upon our business, subject us to regulatory actions and cause a loss of customer confidence in us or our products.

In general, our success depends upon the quality of our products. Quality management plays an essential role in meeting customer requirements, preventing defects, improving our products and services, and assuring the safety and efficacy of our products. Our future success depends on our ability to maintain and continuously improve our quality management program. A quality or safety issue may result in adverse inspection reports, warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution of products, civil or criminal sanctions, costly litigation, refusal of a government to grant approvals and licenses, restrictions on operations or withdrawal of existing approvals and licenses. An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products. See Item 1; “Government Regulation.”

Use of third parties to manufacture our products may increase the risk that we will not have sufficient quantities of our products or such quantities at acceptable levels of cost and quality, which could impair our commercialization efforts.

Milestone Scientific relies on a number of third parties to supply and manufacture the components and raw materials for its products and its does not have long-term supply agreements with suppliers of these component parts and raw materials, and its arrangements with these suppliers are on a purchase-order basis. These products we obtain from suppliers are subject to fluctuations in price and availability attributable to a number of factors, including general economic conditions, commodity price fluctuations, the demand by other companies for the same raw materials and the availability of complementary and substitute materials.

While Milestone Scientific works with suppliers to ensure continuity of supply, no assurance can be given that these efforts will be successful. In the event that any of its existing supply arrangements are terminated or there is a reduction or interruption of supply under these existing arrangements, Milestone Scientific expects that it will be able to enter into new arrangements with alternative suppliers, but these new arrangements may be on terms that are less favorable, including with respect to price and volume, and it may be costly or cause delays in our manufacturing process to transition to a new supplier, particularly in cases in which we must comply with regulatory requirements relating to qualification of new suppliers. The termination, reduction or interruption in supply of these raw materials and components could adversely impact Milestone Scientific Scientific’s ability to manufacture and sell certain of its products.

Third-party suppliers may encounter problems during manufacturing for a variety of reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, equipment malfunction, component part supply constraints, and environmental factors, any of which could delay or impede their ability to supply the components and raw materials for Milestone Scientific’s products. Any such failure to perform or a reduction or interruption in supply could have a material adverse effect on Milestone Scientific’s business and operations.

Risks Related to Regulatory Compliance and Other Legal Matters

We are subject to substantial domestic and international government regulation, including regulatory quality standards applicable to our manufacturing and quality processes. Failure by us to comply with these standards could have an adverse effect on our business, financial condition, or results of operations.

The FDA regulates the approval, manufacturing and sales and marketing of many of our products in the United States. Significant government regulation also exists in other countries in which we conduct business. As a device manufacturer, we are required to register with the FDA and are subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures. In addition, the federal Medical Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests that a device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by the FDA.

In the European community, we are required to maintain certain ISO certifications to sell our products and must undergo periodic inspections by notified bodies to obtain and maintain these certifications. Failure to comply with current governmental regulations and quality assurance guidelines could lead to temporary manufacturing shutdowns, product recalls or related field actions, product shortages or delays in product manufacturing. Efficacy or safety concerns, an increase in trends of adverse events in the marketplace, and/or manufacturing quality issues with respect to our products could lead to product recalls or related field actions, withdrawals, and/or declining sales.

We may be subject, directly, or indirectly, to U.S. federal and state health care fraud and abuse and false claims laws and regulations. Prosecutions under such laws have increased in recent years and we may become subject to such litigation. If we are unable to comply or have not fully complied with such laws, we could face substantial penalties.

Our operations are and will continue to be directly, or indirectly through our distributors, customers, and health care professionals, subject to various U.S. federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, federal False Claims Act, and the Foreign Corrupt Practice Act of 1977 (“FCPA”). These laws may impact, among other things, our proposed sales, and marketing and education programs. The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal health care program such as Medicare or Medicaid. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal health care covered business, the statute has been violated. The Anti-Kickback Statute is broad and, despite a series of narrow safe harbors, prohibits many arrangements and practices that are lawful in businesses outside of the health care industry. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil and administrative sanctions such as fines, imprisonment, and possible exclusion from Medicare, Medicaid, and other federal health care programs. An alleged violation of the Anti-Kickback Statute may be used as a predicate offense to establish liability pursuant to other federal laws and regulations such as the federal False Claims Act. Many states have also adopted laws like the federal Anti-Kickback Statute, some of which apply to the referral of patients for health care items or services reimbursed by any source, not only the Medicare and Medicaid programs.

The federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from, the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “relators” or “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. The frequency of filing qui tam actions has increased significantly in recent years, causing greater numbers of medical device, pharmaceutical and health care companies to have to defend False Claim Act actions. The Affordable Care Act includes provisions expanding the ability of certain relators to bring actions that would have been previously dismissed under prior law. When an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. The Deficit Reduction Act of 2005 encouraged states to enact or modify their state false claims act to be at least as effective as the federal False Claims Act by granting states a portion of any federal Medicaid funds recovered through Medicaid-related actions. Most states have enacted state false claims laws, and many of those states included laws with qui tam provisions.

The Affordable Care Act includes provisions known as the Physician Payments Sunshine Act (section 6002), which require manufacturers of drugs, biologics, devices, and medical supplies covered under Medicare and Medicaid to disclose to the Centers for Medicare and Medicaid Services any transfers of value to physicians and teaching hospitals.

Manufacturers must also disclose investment interests held by physicians and their family members. Failure to submit the required information may result in civil monetary penalties of up to $1 million per year for knowing violations and may result in liability under other federal laws or regulations. Similar reporting requirements have also been enacted on the state level in the United States, and an increasing number of countries worldwide either have adopted or are considering similar laws requiring transparency of interactions with health care professionals. In addition, some states, such as Massachusetts and Vermont, impose an outright ban on certain gifts to physicians. These laws could affect our promotional activities by limiting the kinds of interactions we could have with hospitals, physicians or other potential purchasers or users of our products. Both the disclosure laws and gift bans will impose administrative, cost and compliance burdens on us. If we are found to be in violation of any of the laws described above and other applicable state and federal fraud and abuse laws, we may be subject to penalties, including civil and criminal penalties, damages, fines, or an administrative action of suspension or exclusion from government health care reimbursement programs and the curtailment or restructuring of our operations

In addition, we are subject to the Foreign Corrupt Practices Act (“FCPA”) and other countries’ anti-corruption/anti-bribery regimes, such as the U.K. Bribery Act. The FCPA prohibits improper payments or offers of payments to foreign governments and their officials for obtaining or retaining business. Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, sales agents, or distributors may be ineffective, and violations of the FCPA and similar laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, any of which would likely harm our reputation, business, results of operations and financial condition.

Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, sales agents, or distributors may be ineffective, and violations of the FCPA and similar laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, any of which would likely harm our reputation, business, results of operations and financial condition.

Changes in United States policy regarding international trade, including import and export regulation and international trade agreements, could also negatively impact Milestone Scientific’s business. The United States has imposed tariffs and export controls on certain goods and products imported from China and certain other countries, which has resulted in retaliatory tariffs by China and other countries. Additional tariffs imposed by the United States on a broader range of imports, or further retaliatory trade measures taken by China or other countries in response, could result in an increase in supply chain costs that Milestone Scientific may not be able to offset or that otherwise adversely impact its results of operations. In addition, political tensions between the United States and China have escalated in recent years. Rising political tensions could reduce trade, investment and other economic activities between the two major economies. Any of these factors could have a material adverse effect on Milestone Scientific’s business, prospects, financial condition and results of operations.

Certain modifications to Milestone Scientific’s products may require new 510(k) clearances or other marketing authorizations and may require Milestone Scientific to recall or cease marketing its products.

Once a medical device is permitted to be legally marketed in the United States pursuant to a 510(k) clearance, a manufacturer may be required to notify the FDA of certain modifications to the device.

Manufacturers determine in the first instance whether a change to a product requires a new 510(k) clearance or premarket submission, but the FDA may review any manufacturer’s decision. The FDA may not agree with Milestone Scientific’s decisions regarding whether new clearances are necessary. Milestone Scientific has made modifications to its products in the past and has determined based on its review of the applicable FDA regulations and guidance that in certain instances new 510(k) clearances or other premarket submissions were not required. Milestone Scientific may make similar modifications or add additional features in the future that it believes does not require a new 510(k) clearance. If the FDA disagrees with Milestone Scientific’s determinations and requires it to submit new 510(k) notifications, Milestone Scientific may be required to cease marketing or to recall the modified product until it obtains clearance, and it may be subject to significant regulatory fines or penalties.

Milestone Scientific may be subject to enforcement actions if it engages in improper marketing or promotion of its products.

Milestone Scientific’s promotional materials and training methods must comply with applicable laws, regulations and regulatory authority’s rules and guidelines, including the FDA and the Federal Trade Commission (the “FTC”). If the FDA, the FTC or another regulatory agency determines that Milestone Scientific’s promotional or training material constitutes off-label, false or misleading, unfair or deceptive promotion of its products, it could request that Milestone Scientific modify its training or promotional materials or subject Milestone Scientific to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider Milestone Scientific’s promotional or training materials to constitute off-label, false or misleading, unfair or deceptive promotion of its products, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement, and reputational harm.

Changes in laws and regulations over which we have no control can significantly affect our business and results of operations.

Any governmental entity that regulates our operations in the country in which they are located may enact new legislation or adopt new laws and regulations or policies at any time, and new judicial decisions may change the interpretation of existing legislation or regulations at any time in any of the countries in which our operations or projects are located. We have no control over any such changes. Any new laws or regulations governing our operations could have an adverse impact on our business, results of operations and prospects.

Risks Related to Milestone Scientific Common Stock

Milestone Scientific is effectively controlled by a limited number of stockholders.

Milestone Scientific Scientific’s principal stockholders, Leonard Osser and Gian Domenico Trombetta control approximately 25% of the issued and outstanding shares of common stock. As a result, they can exercise substantial control over our affairs and corporate actions requiring stockholder approval, including electing directors, selling all or substantially all our assets, merging with another entity, or amending our certificate of incorporation. This control could delay, deter, or prevent a change in control and could adversely affect the price that investors might be willing to pay in the future for Milestone Scientific’s securities. In addition, because of the concentration of ownership of our shares of common stock, our stockholders may from time to time, observe instances where there may be less liquidity in the public markets for our securities.

Failure to implement effective internal controls required by the Sarbanes-Oxley Act of 2002 could result in material misstatements in our financial statements, cause investors to lose confidence in the Company’s reported financial information and have a negative effect on the trading price of our common stock.

Section 404 of the Sarbanes-Oxley Act of 2002 requires management of public companies to develop and implement internal controls over financial reporting and evaluate the effectiveness thereof. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual and interim financial statements will not be prevented or detected on a timely basis. Any failure to complete the Company’s assessment of its internal controls over financial reporting or to remediate any material weaknesses that management may identify could harm the Company’s operating results, cause the Company to fail to meet its reporting obligations or result in material misstatements in the Company’s financial statements. Inadequate disclosure controls and procedures and internal controls over financial reporting could also cause investors to lose confidence in the Company’s public disclosures and reported financial information, which could have a negative effect on the trading price of our common stock.

The market price of our common stock may be volatile and may fluctuate significantly, and stockholders could lose all or part of their investment in Milestone Scientific

Our stock price may experience substantial volatility because of many factors, including:

● our failure to meet analysts’ expectations;

● sales or potential sales of substantial amounts of our common stock;

● the success of our strategy to commercialize our CompuFlo Epidural System;

● developments concerning our licensors or product manufacturers;

● conditions in the medical device industry;

● governmental regulation and legislation;

● variations in our anticipated or actual operating results; and

Many of these factors are beyond our control. The stock markets in general, and the market for small, medical device companies, in particular, have historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors could reduce the market price of our common stock, regardless of our actual operating performance.

We have never paid and do not intend to pay cash dividends in the foreseeable future. As a result, capital appreciation, if any, will be your sole source of gain.

We have never paid cash dividends on any of our capital stock, and we currently intend to retain future earnings, if any, to fund the development and growth of our business. In addition, the terms of existing and future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Provisions in our certificate of incorporation, our by-laws and Delaware law might discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Provisions of our certificate of incorporation, our by-laws and Delaware law may have the effect of deterring unsolicited takeovers or delaying or preventing a change in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. These provisions include:

● the inability of stockholders to call special meetings;

● limitations on filling of vacancies.

All of which could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our company.

In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years, has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The existence of the forgoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our Company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

If we fail to adhere to the strict listing requirements of NYSE American, we may be subject to delisting. As a result, our stock price may decline, and our common stock may be de-listed. If our stock were no longer listed on NYSE American, the liquidity of our securities likely would be impaired.

Our common stock currently trades on the NYSE American under the symbol “MLSS”. If we fail to adhere to NYSE American's strict listing criteria, including with respect to stock price, our market capitalization and stockholders’ equity, our stock may be de-listed. This could potentially impair the liquidity of our securities not only in the number of shares that could be bought and sold at a given price, which may be depressed by the relative illiquidity, but also through delays in the timing of transactions and the potential reduction in media coverage. As a result, an investor might find it more difficult to dispose of our common stock. Any failure at any time to meet the continuing NYSE American listing requirements could have an adverse impact on the value of and trading activity in our common stock.

Your percentage of ownership in Milestone Scientificmay be diluted in the future

In the future, your percentage ownership in Milestone Scientific may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including any equity awards that Milestone Scientific will grant to its directors, officers, employees and consultants. Such awards will have a dilutive effect on outstanding share count which could adversely affect the market price of Milestone Scientific’s common stock.

Risks Related to Our Intellectual Property

If we are unable to adequately protect our patents, trade secrets and other proprietary rights, if our patents are challenged or if our provisional patent applications do not get approved, our competitiveness and business prospects may be materially damaged.

Intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names and trade address, are important to our business. We will endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced or used and in jurisdictions into which our products are imported. Our success will depend to a significant degree upon our ability to protect and preserve our intellectual property rights. However, we may be unable to obtain or maintain protection for our intellectual property in key jurisdictions.

Although we own and have applied for patents and trademarks throughout the world, we may have to rely on judicial enforcement of our patents and other proprietary rights. Our patents and other intellectual property rights may be challenged, invalidated, circumvented, and rendered unenforceable or otherwise compromised. A failure to protect, defend or enforce our intellectual property could have an adverse effect on our financial condition and results of operations. Similarly, third parties may assert claims against us and our customers and distributors alleging our products infringe upon third party intellectual property rights.

We believe that the intellectual property underlying our products is a competitive advantage. We rely on a combination of patent rights, trade secrets and nondisclosure and non-competition agreements to protect our proprietary intellectual property, and we will continue to do so. There can be no assurance that our patents, trade secret policies and practices or other agreements will adequately protect our intellectual property. Our issued patents may be challenged, found to be over-broad or otherwise invalidated in subsequent proceedings before courts or the U.S. Patent and Trademark Office. Even if enforceable, we cannot provide any assurances that they will provide significant protection from competition. The processes, systems, and/or security measures we use to preserve the integrity and confidentiality of our data and trade secrets may be breached, and we may not have adequate remedies resulting from such breaches. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. There can be no assurance that the confidentiality, nondisclosure and non-competition agreements with employees, consultants and other parties with access to our proprietary information to protect our trade secrets, proprietary technology, processes and other proprietary rights, or any other security measures relating to such trade secrets, proprietary technology, processes and proprietary rights, will be adequate, will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or proprietary knowledge. To the extent that our consultants, contractors, or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

If we must take legal action to protect, defend or enforce our intellectual property rights, any suits or proceedings could result in significant costs and diversion of our resources and our management’s attention, and we may not prevail in any such suits or proceedings. A failure to protect, defend or enforce our intellectual property rights could have an adverse effect on our results of operations.

Third parties could obtain patents that may require us to negotiate licenses to commercialize our technologies, and we cannot assure you that the required licenses would be available on reasonable terms or at all.

Third parties may claim that one or more aspects of our technologies or products may infringe on their intellectual property rights.

Our computer-controlled anesthesia systems are complex systems and numerous U.S. and foreign patents and pending patent applications owned by third parties exist in fields that relate to the development and commercialization of drug delivery systems. In addition, many companies have employed intellectual property litigation as a strategy to gain a competitive advantage. It is possible that infringement claims may occur as the number of products and competitors in our market increases. In addition, to the extent that we gain greater visibility and market exposure as a public company, we face a greater risk of being the subject of intellectual property infringement claims. We cannot be certain that the conduct of our business does not and will not infringe intellectual property or other proprietary rights of others in the U.S. and in foreign jurisdictions. If any of our computer-controlled anesthesia systems are found to infringe third party patent rights, we could be prohibited from manufacturing and commercializing the infringing technology unless we obtain a license under the applicable third-party patent and pay royalties or are able to design around such patent.

We may be unable to obtain a license on terms acceptable to us, or at all, and we may not be able to redesign the system to avoid infringement. Even if we can redesign our products or processes to avoid an infringement claim, our efforts to design around the patent could require significant time, effort and expense and ultimately may lead to an inferior or costlier product. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from our business.

Furthermore, if any such claim is successful, a court could order us to pay substantial damages, including compensatory damages for any infringement, plus prejudgment interest and could, in certain circumstances, treble the compensatory damages and award attorney fees. These damages could be substantial and could harm our reputation, business, financial condition, and operating results. A court also could enter orders that temporarily, preliminary, or permanently prohibit us, our licensees, if any, and our customers from making, using, selling, offering to sell, or importing one or more of our products or using our proprietary technologies or processes, or could enter an order mandating that we undertake certain remedial activities.

Any of these events could seriously harm our business, operating results, and financial condition.

General Business Risks

Continued instability in the credit and financial markets may negatively impact our ability to commercialize our products.

Financial markets in the United States, Canada, Europe, and Asia continue to experience disruption, including, among other things, significant volatility in security prices, declining valuations of certain investments, as well as severely diminished liquidity and credit availability. Business activity across a wide range of industries and regions continues to be reduced. As a small medical device company, we rely on third parties for several important aspects of our business, including contract manufacturing of products, distribution of our products and sales and marketing. These third parties may be unable to satisfy their commitments to us due to tightening of global credit from time to time, which would adversely affect our business. The continued volatility in the credit and financial market conditions may also negatively impact our ability to access capital and credit markets and our ability to manage our cash balance. While we are unable to predict the continued duration and severity of any adverse conditions in the United States and other countries, any of the circumstances mentioned above could adversely affect our business, financial condition, operating results and cash flow or cash position.

Our business and operations would suffer in the event of cybersecurity or other system failures.

Despite the implementation of security measures, our internal computer systems, and those of any third parties with which we partner are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any cybersecurity or system failure, accident or breach to date, if an event were to occur, it could result in a material disruption of our operations, substantial costs to rectify or correct the failure, if possible, and potentially violation of HIPAA and other privacy laws applicable to our operations. If any disruption or security breach resulted in a loss of or damage to our data or applications or inappropriate disclosure of confidential or protected information, we could incur liability, further development of our products could be delayed, and our operations could be disrupted, any of which could severely harm our business and financial condition. Issues with product quality could have a material adverse effect upon our business, subject us to regulatory actions and cause a loss of customer confidence in us or our products.

Insurance coverage may be inadequate or unavailable to cover any product liability losses we incur.

Our business exposes us to potential product liability claims that are inherent in the design, manufacture, testing, inspection, and sale of dental and medical devices. We are subject to product liability lawsuits alleging that component failures, manufacturing flaws, manufacturing defects, negligence in manufacturing, design defects, negligence in design, or inadequate disclosure of product-related risks, warnings, or product-related information resulted in an unsafe condition, injury, or death to customers. The risk of one or more product liability claims or lawsuits may be even greater after we launch new products with new features or enter new markets where we have no prior experience selling our products and rely on newly-hired staff or new independent distributors or contractors to provide new customer training and customer support. In addition, the misuse of our products or the failure of customers to adhere to operating guidelines could cause significant harm to customers, including death, which could result in product liability claims. Product liability lawsuits and claims, safety alerts or product recalls, with or without merit, regardless of any available insurance coverage, could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business, harm our reputation and adversely affect our ability to attract and retain customers, any of which could have a material adverse effect on our business, financial condition and operating results.

Item1B. Unresolved Staff Comments

None.

Item 2. Description of Property

The headquarters for Milestone Scientific is located at 425 Eagle Rock Avenue, Roseland, New Jersey 07068, and our telephone number is (973) 535-2717. In August 2019, the Company signed a seven year lease for a facility in Roseland, New Jersey (the “Roseland Facility”). The Roseland Facility carries monthly lease payments of $9,275, commencing April 1, 2021. The Company is also responsible for electric charges equal to $2.00 per square foot, which is equal to $11,130 annually, payable in equal monthly installments of $928. The Company will also be required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises in excess of new base year amounts. A third-party distribution and logistics center in Pennsylvania handles shipping and order fulfillment on a month-to-month basis.

Milestone Scientific does not own or intend to invest in any real property. Milestone Scientific currently has no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.

Item3. Legal Proceedings

Milestone Scientific is not involved in any material litigation.

Item4. Mine Safety Disclosure

Not applicable.

PART II

Item5. Market for Common Equity, and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities

Market Information

On June 1, 2015, our common stock was listed on the NYSE American under the symbol “MLSS”. The following table sets forth the high and low sales prices of Milestone’s common stock for the periods presented.

Holders

As of March 31, 2023, we had approximately 99 stockholders of record of our common stock. We believe that we have approximately 3,911 beneficial owners of our common stock.

Dividends

The holders of common stock are entitled to receive such dividends as may be declared by Milestone Scientific’s Board of Directors. Milestone Scientific has not paid and does not expect to declare or pay any dividends in the foreseeable future.

Sales of Unregistered Securities

Not applicable.

ITEM 6. Selected Financial Data

Milestone Scientific is a “smaller reporting company” as defined by Regulations S-K and as such, is not required to provide the information contained in this item pursuant to Regulation S-K.

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

Milestone Scientific is a biomedical technology research and development company that patents, designs, develops and commercializes innovative diagnostic and therapeutic injection technologies and devices for medical, dental and cosmetic use. Since our inception, we have engaged in pioneering proprietary, innovative, computer-controlled injection technologies, and solutions for the medical and dental markets. We believe our technologies are proven and well established. Our common stock was initially listed on the NYSE American on June 1, 2015, and trades under the symbol “MLSS”.

We have focused our resources on redefining the worldwide standard of care for injection techniques by making the experience more comfortable for the patient by reducing the anxiety and stress of receiving injections from the healthcare provider. Our computer-controlled injection devices make injections precise, efficient, and virtually painless.

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 is suitable for all dental procedures that require local anesthetic. Our proprietary DPS Dynamic Pressure Sensing technology® is our technology platform that advances the development of next-generation devices. It regulates flow rate and monitoring pressure from the tip of the needle, through platform extensions for local anesthesia for subcutaneous drug delivery, used in various dental and medical injections. It has specific medical applications for epidural space identification in regional anesthesia procedures and intra-articular joint injections.

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

Because of combining the ability to regulate the flow rate and monitor pressure at the tip of the needle, Milestone Scientific developed the industry’s first solution for painlessly administering an intra-ligamentary injection, i.e., “single-tooth anesthesia” which could be used as the only injection necessary for achieving dental anesthesia, foregoing the need to administer traditional injections such as a nerve branch block. In addition to single-tooth anesthesia,the STA System can effectively perform all the traditional injections that dentists routinely give but can provide them virtually pain free and with numerous clinical advantages. This device, which also utilizes a disposable handpiece, is currently marketed by Milestone Scientific as the WandSTA® System.

Our dental devices have been used to administer tens of millions of injections worldwide. Each of our devices has a related single use disposable handpiece, leading to a continuing revenue stream following sale of the device. At present, we sell disposable handpieces unique to our legacy product (the Wand and CompuDent) to users who have not upgraded to our current dental product, the WandSTA System.

Building on the success of our proprietary, core technology platform for dental injections, and desiring to pursue other growth opportunities, we have recently begun to expand the uses and applications of our proprietary, patented technologies to achieve greater operational efficiencies, enhanced patient safety and therapeutic adherence, patient satisfaction, and improved quality of care across a broad range of medical specialties. In June 2017, we received FDA regulatory clearance to sell the CompuFlo Epidural Computer Controlled Anesthesia System in the United States for certain medical applications. We intend to continue to expand the uses and applications of our DPS Dynamic Pressure Sensing technology. We believe that we and our technology solutions are widely recognized by key opinion leaders (i.e., academics, anesthesiologists and practicing dentists whose opinions are widely respected), industry experts and medical and dental practitioners as a leader in the emerging, computer-controlled injection industry.

Wand/STA Dental Product

Medical Market Product

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

For the Year Ended December 31, 2022

Domestic: US Dental Medical Grand Total

International: Rest of World Dental Medical Grand Total

International: China Dental Medical Grand Total

Accessories - - -

For the Year Ended December 31, 2021

Domestic: US 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 Milestone Scientific and its wholly-owned and majority-owned subsidiaries including, Wand Dental, and Milestone Medical. All significant, intra-entity transactions and balances are eliminated in the consolidation.

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. Milestone Scientific has completed the VIE analysis relating to Milestone China and Anhui Maishida Medical Technology, Co. Ltd. (“Anhui”).

Milestone Scientific has determined that due to the loss of equity investment in Anhui, the company no longer has significant influence of Anhui and therefore Anhui is not a variable interest. 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 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.

Assessment of our Ability to Continue as a Going Concern

In accordance with (“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.

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. Total operating losses since inception of $116.4 million. The operating losses were $8.8 million and $7.4 million, for the years ended December 31, 2022, and 2021, respectively. Management has prepared cashflow forecasts covering a period of 12 months from the date of issuance of these financial statements. These forecasts include several revenue and operating expense assumptions which indicate that the Company’s current cash and liquidity is sufficient to finance the operating requirements for at least the next 12 months. Management believes that the Company will have sufficient cash reserves to meet its anticipated obligations for at least the next twelve months from the filing date of this report. Milestone Scientific is actively pursuing the generation of positive cash flows from operating activities through an increase in revenue from its dental business worldwide, the generation of revenue from its medical devices and disposables business in the United States and worldwide, and a reduction in operating expenses. However, the Company’s continued operations will depend on its ability to raise additional capital through various potential sources until it achieves profitability, if ever.

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.

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, 2022 compared to the year ended December 31, 2021.

Operating results:

Operating expenses:

Depreciation and amortization expense 63,755 73,836

Net loss attributable to noncontrolling interests 66,735 58,115

Net loss attributable to Milestone Scientific Inc. (8,706,131 ) $ (6,818,317 )

Net cash used in investing activities (8,527) (15,189)

Net cash (used in) provided by financing activities (8,544) 4,589,282

Year endedDecember 31, 2022, compared to year ended December 31, 2021.

Net sales for years ended December 31,2022, and 2021were as follows:

Consolidated revenue for the years ended December 31, 2022, and 2021 was approximately $8.8 million and $10.3 million, respectively. Dental revenue for the years ended December 31, 2022 and 2021 was approximately $8.8 million and $10.1 million, respectively. The decrease in Dental revenue of approximately $1.4 million for the year ended December 31, 2022, as compared to 2021 was driven by lower revenue from China of approximately $1.5 million and a decrease in domestic revenue of approximately $278,000 of which $179,000 related to an allowance for sales returns from Henry Schein due to the termination of the distribution agreement. Dental international revenue increased approximately $347,000 compared to December 31, 2021. Medical revenue decreased approximately $100,000 for the year ended December 31, 2022 , as compared to December 31, 2021, which was primarily the result of changes to the Company’s near term commercial strategy.

Gross Profit for years ended December 31, 2022 and 2021 were as follows:

Consolidated gross profit for the years ended December 31, 2022 and 2021 decreased approximately $1.4 million or 22%. The decrease was driven by an allowance of approximately $550,000 on slow moving Medical finished goods.

Selling, general and administrative expenses for years ended December 31,2022 and2021 were as follows:

Consolidated selling, general and administrative expenses for the years ended December 31, 2022 and 2021 were approximately $12.5 million and $12.7 million, respectively. The decrease of approximately $224,000 is categorized in several areas. Employee salaries, and benefits expenses decreased approximately $886,000 during the year ended December 31, 2022 compared to the same period in 2021. The Company reduced director fees, bonuses, employee recruiting fees, and medical insurance for year ended December 31, 2022. The Company reduced marketing expense for the year ended December 31, 2022 by approximately $86,000 due to decreased trade show participation and decrease royalties expenses by approximately $4,000. The Company increased employee travel and professional fees by approximately $322,000 for the years ended December 31, 2022 compared to December 31, 2021 due to international commercial efforts. During year ended December 31, 2022 warehousing, and quality control expenses associated with quality assurance in connection with ISO certification and digitizing parts of our quality control increased approximately $379,000, and other selling, general and administrative expenses increased approximately $51,000 due to the additional professional services quality control required in the compliance and regulations

Research and Developmentfor years ended December 31, 2022 and 2021 were as follows:

Corporate - - -

Consolidated research and development expenses for the years ended December 31, 2022, and 2021, were approximately $1.2 million and $878,000, respectively. The increase of approximately $272,000 is related to the Company developing the next generation to the STA Single Tooth Anesthesia System product line.

Profit (Loss) from Operationsfor years ended December 31, 2022 and 2021 were as follows:

The loss from operations was approximately $8.8 million and $7.4 million for the years ended December 31, 2022 and 2021, respectively. The increase in the loss from operations was primarily driven the decrease in gross profit.

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. On December 31, 2022, Milestone Scientific had cash and cash equivalents of approximately $8.7 million and working capital of approximately $9.7 million. Forthe years ended December 31, 2022 and 2021, we had cash flows used in operating activities of approximately $6.0 million and $4.0 million, respectively

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.

Contractual Obligations

The impact of the consolidated contractual obligations at December 31, 2022, 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 devices, including purchase obligations entered into post year end, which will require payment in during the year ended 2023.

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

Evaluation of Disclosure Controls and Procedure

We maintain disclosure controls and procedures designed to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer, and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosures. As required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer, and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022. Based on this evaluation, our Chief Executive Officer, and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in paragraph (e) of Rules 13a-15 and 15d-15 under the Exchange Act) were effective at December 31, 2022.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organization of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2022, our internal control over financial reporting was effective.

Changes in Internal Control over Financial Reporting

During the year ended December 31, 2022, the Company remediated the identified material weakness from December 31, 2021.

Item 9B. Other Information

None.

Item 9C. Disclosure regarding Foreign Jurisdiction that Prevent inspections

None.

PART III

The information required by Part III is omitted from this Annual Report because it will be included in our definitive proxy statement to be filed pursuant to Regulation 14A for our 2023 Annual Meeting of Stockholders, or the 2023 Proxy Statement, and such information is incorporated herein by reference.