MILESTONE SCIENTIFIC INC

None

SIGNATURES

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

Date: March 29, 2024

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

REPORT INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2023 and 2022

To the Shareholders and Board of Directors of

Milestone Scientific, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Milestone Scientific, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

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

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2016

East Hanover, New Jersey

March 29, 2024

YEARS ENDED DECEMBER 31,

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31 2023 AND 2022

YEARS ENDED DECEMBER 31,

MILESTONE SCIENTIFIC INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A—** ORGANIZATION AND BUSINESS**

All references in this report to “Milestone Scientific,” “us,” “our,” “we,” the “Company” or “Milestone” refer to Milestone Scientific Inc., and its consolidated subsidiaries, Wand Dental, Inc., and Milestone Innovations Inc. and Milestone Education LLC (all described below), unless the context otherwise indicates. Milestone Scientific is the owner of the following registered U.S. trademarks: CompuDent®; CompuMed®; CompuFlo®; DPS Dynamic Pressure Sensing technology®; Milestone Scientific®; the Milestone logo®; SafetyWand®; STA Single Tooth Anesthesia System®; and The Wand®.

Milestone Scientific was incorporated in the State of Delaware in* August 1989.Milestone Scientific has developed a proprietary, computer-controlled anesthetic delivery device, usingThe Wand*®, a single use disposable handpiece. The device is marketed in dentistry under the trademarkCompuDent®,andSTA Single Tooth Anesthesia System® and in medicine under the trademarkCompuMed®. CompuDent® is suitable for all dental procedures that require local anesthetic.CompuMed® is suitable for many medical procedures regularly performed in plastic surgery, hair restoration surgery, podiatry, colorectal surgery, dermatology, orthopedics, and many other disciplines. The dental devices are sold in the United States, Canada and in 60 other countries. Certain medical devices have obtained CE mark approval and can be marketed and sold in most European countries. In* June 2017,Milestone Scientific received510*(k) marketing clearance from the U.S. Food and Drug Administration (FDA) on the* CompuFlo*® Epidural Computer Controlled Anesthesia System (“Epidural”).

We are in the process of meeting with medical facilities and device distributors within the United States, Middle East and Europe. Certain of our medical instruments have obtained European CE mark approval and can be marketed and sold in most European countries.

In2020, the Company received a Notice of Allowance from the United States Patent and Trademark Office (USPTO) related to its new CompuPulse System, which combines the benefits of our CompuWave technology with a manual syringe. The new CompuPulse System allowsone to identify a pulsatile pressure waveform in a variety of applications, thereby improving the reliability and safety of a drug delivery procedure. Importantly,not all procedures require the sophistication of our CompuFlo system, which precisely controls the administration and flow rate of medication as it is being administered. This new technology provides an efficient and low-cost alternative for procedures where a manual syringe* may*suffice, while still providing the ability to verify needle and subsequent catheter placement.

NOTE B- LIQUIDITY AND UNCERTAINTIES

The Company has evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern withinone year after the date that the consolidated financial statements are issued. The Company has incurred total losses since inception of $123.3 million. The operating losses were $7.1 million and $8.8 million, for the years ended* December 31, 2023,and2022,* respectively. On* December 31, 2023,Milestone Scientific had cash and cash equivalents and marketable securities of approximately $6.0 million and working capital of approximately $7.7 million. For thetwelve* months ended* December 31, 2023and2022,* we had cash flows used in operating activities of approximately $5.3 million and $6.0 million, respectively.

Management has prepared cashflow forecasts covering a period of12 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 next12 months. Additionally, the Company was approved on* September 12, 2023*to sell Net Operating Losses through the New Jersey Technology Business Tax Certificate Transfer Program (“NJ NOL Program”), a program administered by the New Jersey Economic Development Authority (“NJEDA”). Management believes this program will generate positive cash flow in the near future. Milestone Scientific is actively pursuing the generation of positive cash flows from operating activities through an increase in revenue from its dental business worldwide, the generation of revenue from its medical devices and disposables business in the United States and worldwide, and a reduction in operating expenses. However, the Company’s continued operations will depend on its ability to raise additional capital through various potential sources until it achieves profitability, if ever.

In addition to its employees, the Company relies on (i) distributors, agents, andthird-party logistics providers in connection with product sales and distribution and (ii) raw material and component suppliers in the U.S., Europe, and China. If the Company, or any of these entities encounter any disruptions to its or their respective operations or facilities, or if the Company or any of thesethird-party partners were to shut down for any reason, including by fire, natural disaster, such as a hurricane, tornado or severe storm, power outage, systems failure, labor dispute, pandemic or other public health crises, or other unforeseen disruption, then the Company or they* may*be prevented or delayed from effectively operating its or their business, respectively.

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NOTE C —** SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

1. ** Principles of Consolidation**

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), and the applicable rules and regulations of the Securities and Exchange Commission (SEC) include the accounts of Milestone Scientific and its wholly owned and majority owned subsidiaries, including, Wand Dental (wholly owned), and Milestone Innovations Inc.(wholly owned). All significant, intra-entity transactions and balances have been eliminated in the consolidation. Ownership interests in consolidated entities that are held by entities other than us are reported as noncontrolling interests in our consolidated balance sheets. Losses attributed to noncontrolling interests are reported separately in our consolidated statements of operations.

During* December 2023,*the Board of Directors of the Company approved a resolution to repurchase the remaining minority stake of Milestone Medical, Inc. for $214,000. Concurrently, the Company transferred the net assets of Milestone medical, Inc. to a newly created, wholly-owned subsidiary, Milestone Innovations, Inc,. a Delaware corporation.

2. Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to the inventory valuation, and cash flow assumptions going concern considerations. The Company bases its estimates on historical experience, known trends and other market-specific or relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known Actual results could differ from those estimates.

3. ** 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 followingfive steps:

The Company derives its revenues from the sale of its products, primarily dental instruments, handpieces, and other related products. The Company sells its products directly to consumers in the United States and through a global distribution network that includes both exclusive and non-exclusive distribution agreements with related andthird parties.

Revenue from product sales is recognized upon transfer of control of a product to a customer at a point in time, generally upon date of shipment. The Company hasno obligation to product sales for any installation, set-up, or maintenance, these being the responsibility of the buyer. Milestone Scientific's only obligation after sale is the normal commercial warranty against manufacturing defects if the alleged defective unit is returned within the warranty period.

E-Commerce

As of* January 3, 2023,the Company launched an E-Commerce platform, selling and shipping STA Single Tooth Anesthesia Systems® (STA) and handpieces directly to dental offices and dental groups within the United States. Our E-commerce portal accepts online payments via credit and debit cards. The cost of delivery is charged to the customer along with appropriate sales tax. The Company recognizes revenue from product sales at the time the product ships to a customer via athird* party carrier.

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Sales Returns

The Company records allowances for product returns as a reduction of revenue at the time product sales are recorded. Several factors are considered in determining whether an allowance for product returns is required, including the customers’ return rights and the Company’s historical experience with returns and the amount of product in the distribution channelnot consumed by end users and subject to return. The Company relies on historical return rates to estimate returns.

The Company terminated its major U.S. distributor contract as of* December 31, 2022.That distributor had return rights in connection with this contract termination that extended through March 31, 2023.The Company recorded allowance of approximately $179,000 for those returns within its December 31, 2022financial statements. As of December 31, 2023*no returns have been presented, and the Company reversed the allowance for sales returns.

Financing and Payment

The Company's payment terms differ by geography and customer, but payments from distributors are required within90 days or less from the date of shipment. The E-commerce portal sells directly to end users and accepts online payments via credit and debit cards via athird-party. These payments from thethird party are typically settled withintwo business days.

Disaggregation of Revenue

The Company operates intwo operating segments: dental and medical. Therefore, the results of the Company's operations are reported on a consolidated basis for the purposes of segment reporting, consistent with internal management reporting. See Note M for revenues by geographical market, based on the customer’s location, and product category for the years ended* December 31, 2023and2022* respectively.

5. ** Cash and Cash Equivalents**

Milestone Scientific considers all highly liquid investments purchased with an original maturity ofthree months or less to be cash equivalents. As of* December 31, 2023and2022* Milestone Scientific has approximately $3.0 million and $8.7 million, respectively, in cash. As of* December 31, 2023and2022* Milestone Scientific had cash that exceeded the Federal Deposit Insurance Corporation insurance limit of*$250,000.*

6. Marketable Securities

The Company’s marketable securities are comprised of treasury bills with an original maturity greater thanthree months from date of purchase. The Company’s marketable securities are measured at fair value and are accounted for in accordance with ASU2016-01. Unrealized holding gains and losses on treasury bills are recorded in interest income on the consolidated statements of operations. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of the marketable securities.

The appropriate classification of marketable securities is determined at the time of purchase and evaluated as of each reporting balance sheet date. Investments in marketable debt and equity securities classified as available-for-sale are reported at fair value. Fair value is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Declines in the fair values of equity securities that are considered other-than-temporary, are charged to other income (expense), net. The Company considers available evidence in evaluating potential impairments of its investments, including the duration and extent to which fair value is less than cost. As of* December 31, 2023the Company held approximately $3.0 million in U.S. treasury securities, with maturity dates within3* and6 months.

7. ** Accounts Receivable**

Milestone Scientific sells a significant amount of its product on credit terms to its major distributors. Milestone Scientific estimates losses from the ability or inability of its customers to make payments on amounts billed. Most credit sales are due within90 days from invoicing. There havenot been any significant credit losses incurred to date. As of* December 31, 2023and2022,* accounts receivable was recorded, net of allowance for doubtful accounts of $10,000.

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9. ** Inventories**

Inventories principally consist of finished goods and component parts stated at the lower of cost (first-in,first-out method) or net realizable value. Inventory quantities on hand are reviewed on a quarterly basis and a provision for excess, slow moving, defective, and obsolete inventory is recorded if required based on past and expected future sales, potential technological obsolescence, and product expiration requirements.

The valuation allowance creates a new cost basis for the inventory, and it isnot subsequently marked up through a reduction in the valuation allowance based on any changes in the underlying facts and circumstances. When the valuation allowance is initially recorded, the increase to the allowance is recognized as an increase in cost of sales. The valuation allowance is only reduced if or when the underlying inventory is sold or destroyed, at which time cost of sales recognized would include the previous adjusted cost basis.

10. ** Furniture, Fixture and Equipment** ** **

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

11. ** Intangible Assets**–** Patents and Developed Technology**

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

12. Impairment of Long-Lived Assets

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

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

13. ** Research and Development**

Research and development costs, which consist principally of new product development costs payable tothird parties, are expensed as incurred.

14. ** Income Taxes**

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

On* December 31, 2023and2022,* we hadno uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Operations. No interest and penalties are present for periods open. Tax returns for the2020, 2021, and2022 years are subject to audit by federal and state jurisdictions.

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15. ** Basic and Diluted Net Loss Per Common Share**

Milestone Scientific presents “basic ”loss per common share applicable to common stockholders and, if applicable, “diluted” loss per common share applicable to common stockholders pursuant to the provisions of ASC260, “Earnings per Share”. Basic loss per common share is calculated by dividing net income or loss applicable to common stockholders by the weighted average number of common shares outstanding and to be issued common shares of 72,775,781 and 70,607,338 during the years ended* December 31, 2023and2022,* respectively. The calculation of diluted earnings per common share is like that of basic earnings per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of stock options and warrants were issued during the period.

Since Milestone Scientific had net losses in the years ended* December 31, 2023and2022,* the assumed effects of the exercise of potentially dilutive outstanding stock options, unissued restricted stock awards (“RSA”) and warrants, werenot included in the calculation as their effect would have been anti-dilutive. Such outstanding options, RSA and warrants 3,771,151 and 7,855,160 on* December 31, 2023and2022,* respectively.

16. ** Fair Value of Financial Instruments**

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date (exit price). The Company required us to classify fair value measurements inone of the following categories.

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of an input to the fair value measurement requires judgment and* mayaffect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. As of December 31, 2023,*the Company has the following assets that were measured at fair value on a recurring basis.

Marketable Securities included US Treasury securities totaling $2,976,573 that are considered to be highly liquid and easily transferable at* December 31, 2023.US Treasury securities are valued using inputs observable in active markets for identical securities and are therefore classified at Level1* within the Company fair value hierarchy.

The Company hadno assets or liabilities that were measured at fair value on a recurring basis as of* December 31, 2022.*

17. Stock-Based Compensation

Milestone Scientific accounts for stock-based compensation under ASC Topic718, Share-Based Payment. ASC Topic718 requires all share-based payments to employees, non-employees, directors, and officers, including grants of employee stock options, to be recognized in the consolidated statements of operations over the service period, as an operating expense, based on the grant-date fair values. The Company accounts for forfeitures as they occur.

18. Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC480, “Distinguishing Liabilities from Equity” (“ASC480”) and ASC815, Derivatives and Hedging (“ASC815”).

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The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC480, whether they meet the definition of a liability pursuant to ASC480, and whether the warrants meet all of the requirements for equity classification under ASC815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that donot meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. Management concluded that its warrants qualify for equity accounting treatment.

19. Recent Accounting Pronouncements

.

Recently Issued Accounting Pronouncement

In* November 2023,FASB issued ASU2023*-07, Segment Reporting (Topic280*), Improvements to Reportable Segment Disclosures*, which provides improvements to reportable segment disclosure requirements, primarily through enhanced disclosures around segment expenses. ASU2023-07 requires us to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. ASU2023-07 also requires that the Company disclose an amount for other segment items by reportable segment, a description of their composition and provide all annual disclosures about a reportable segment’s profit or loss and assets pursuant to Topic280 during interim periods. The Company must also disclose the CODM’s title and position, as well as certain information around the measures used by the CODM and an explanation of how the CODM uses the reported measures in assessing segment performance and deciding how to allocate resources. For public entities with a single reportable segment, the entity must provide all the disclosures required pursuant to ASU2023-07 and all existing segment disclosures under Topic280. The amendments of ASU2023-07 are effective for us for annual periods beginning* January 1, 2024,and effective for interim periods beginning January 1, 2025.Early adoption is permitted for annual financial statements that havenot* yet been issued or made available for issuance. The Company will evaluate the impact of ASU2023-07 on our financial statements.

In* December 2023,FASB issued ASU2023*-09,** Income Taxes (Topic740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU2023-09 provide improvements primarily related to the rate reconciliation and income taxes paid information included in income tax disclosures. The Company would be required to disclose additional information regarding reconciling items equal to or greater thanfive percent of the amount computed by multiplying pretax income (loss) by the applicable statutory tax rate. Similarly, the Company would be required to disclose income taxes paid (net of refunds received) equal to or greater thanfive percent of total income taxes paid (net of refunds received). Additionally, the Company would be required to disclose income (loss) from continuing operations before income tax expense disaggregated by foreign and domestic jurisdictions, as well as income tax expense disaggregated by federal, state, and foreign jurisdictions. The amendments in ASU2023-09 are effective* January 1, 2025,including interim periods. Early adoption is permitted for annual financial statements that havenot* yet been issued or made available for issuance. The Company will evaluate the impact of ASU2023-09 on our financial statements.

Recently Adopted Accounting Pronouncement

In* June 2016,the FASB issued ASU2016*-13, Measurement of Credit Losses on Financial Instruments (“ASU2016-13”), which amends the guidance on measuring credit losses for certain financial assets measured at amortized cost, including trade receivables. The FASB has subsequently issued several updates to the standard, providing additional guidance on certain topics covered by the standard. This update requires entities to recognize an allowance for credit losses using a forward-looking expected loss impairment model, taking into consideration historical experience, current conditions, and supportable forecasts that impact collectability. As* January 1, 2023,the Company adopted ASU2016*-13, Measurement of Credit Losses on Financial Instruments (“ASU2016-13”) the adoption of this ASU doesnot have a material impact on our financial statements.

In* November 2019,the FASB issued ASU2019*-10, Financial Instruments - Credit Losses (Topic,326), Derivatives and hedging (Topic815*), and Leases (Topic842): Effective* dates, which deferred the effective date of ASU2016-13 for the Company. As a result of ASU2019-10, ASU2016-13 is effective for all entities with fiscal years beginning after* December 15, 2022,including interim periods. As of January 1, 2023,the Company adopted ASU2019*-10, Financial Instruments - Credit Losses (Topic,326), Derivatives and hedging (Topic815*), and Leases (Topic842)* the adoption of this ASU doesnot have a material impact on our financial statements.

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NOTE D —** INVENTORIES**

The Company has recorded an allowance on slow moving Medical finished goods due to the slow adoption of the epidural instruments and handpieces for approximately $258,000 and $582,000 as of* December 31, 2023and2022,* respectively.

NOTE E —** ADVANCES ON CONTRACTS**

The advances on contracts represent funding of future dental STA "Single Tooth Anesthesia System" and epidural inventory purchases and epidural replacements parts. The balance of the advances as of* December 31, 2023and2022* was approximately $1.4 million and $1.3 million respectively.

NOTE F—** FURNITURE, FIXTURES AND EQUIPMENT**

Depreciation expenses was $12,999 and $14,180 for the years ended* December 31, 2023,and2022,* respectively.

NOTE G —INTANGIBLES, NET

Patents are amortized utilizing the straight-line method over estimated useful lives ranging from 3 to 20 years. Amortization expense was approximately $49,000 and $50,000 for the years ended* December 31, 2023and2022,* respectively. The annual amortization expense expected to be recorded for existing intangibles assets for the years2024 through2027 is approximately $34,000, $28,000, $28,000 and $86,000, respectively.

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NOTE H —** STOCKHOLDERS**’** EQUITY**

PUBLIC OFFERING

On* December 10, 2023,the Company completed a public offering for sale of 4,765,000 common stock, at $0.63 per share which generated net proceeds of approximately $2.6 million. In addition, the Company granted the Underwriter a45*-day option to purchase up to an additional 714,750 shares of Common Stock at the same price to cover over-allotments. Refer to subsequent event note Q.

NONCONTROLLING INTEREST

During* December 2023,the Board of Directors of the Company approved a resolution to merge Milestone Medical, Inc. with and into a newly created, wholly owned subsidiary, Milestone Innovations, Inc., a Delaware corporation, with Milestone Innovations, Inc. as the surviving entity. As a result of such merger, the public stockholders are entitled to receive for their shares traded on the Warsaw Stock Exchange an aggregate of approximately $214,000, and Milestone Medical, Inc. has been de-listed,no longer requiring reports and other filings in Poland. The Company accounted for the transaction as a transfer between entities under common control pursuant to ASC805,* Business Combinations ("ASC805"). Due to the nature of the transaction, the Company didnot remeasure the transferred assets at fair value but recorded them at their carrying basis at the time of transfer pursuant to ASC805. As the Company was acquiring an additional interest in Milestone Medical, the Company accounted for the transaction as a capital transaction pursuant to ASC810, Consolidation, as the Company retained control of both Milestone Medical, Inc. and Milestone, Innovations, Inc prior to and subsequent to the transaction. As of* December 31, 2023,*the Company recorded a liability due to the minority shareholder of Milestone Medical. The Company recorded a charge to additional paid in capital of approximately $485,000 which includes the reclassification of accumulated deficit attributed to the non-controlling interest on the date of the transaction and payable to non-controlling interest holders as a result of this transaction.

WARRANTS

The following table summarizes information about shares issuable under warrants outstanding on* December 31, 2023:*

SHARES TO BE ISSUED

As of* December 31, 2023and2022,* there were 2,571,292 and 2,057,976, respectively shares to be issued whose issuance has been deferred under the terms of an employment agreements with the former Interim Chief Executive Officer, former Chief Financial Officer, and other employees of Milestone Scientific. Such shares will be issued to each party upon termination of their employment.

As of* December 31, 2023and2022,* there were 527,625 and 382,697 respectively shares to be issued to non-employees, that will be issued to non-employees for services rendered. The number of shares was fixed at the date of grant and were fully vested upon grant date.

The following table summarizes information about shares to be issued on* December 31, 2023and2022.*

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NOTE I —** STOCK OPTION PLANS**

The Milestone Scientific Inc., Amended and Restated2020 Equity Incentive Plan, provides for awards of restricted common, stock restricted stock units, options to purchase and other awards. On* June**28,* 2023 the plan was amended and restated (the*"2020* Plan") the maximum 4,000,000 common stock share was increased to 11,500,000 shares of common stock. The plan expires in* June 2031.Options maybe granted to employees, directors, and consultants of Milestone Scientific for the purchase of shares of common stock at a pricenot* less than the fair market value of common stock on the date of grant. Generally, options become exercisable over athree-year period from the grant date and expire five years after the date of grant. As of* December 31, 2023and2022,* the Company had 9,174,520 and 323,190, respectively, remaining options available for grants under the Plan.

Milestone Scientific recognizes compensation expenses over the requisite service period and in the case of performance-based options over the period of the expected performance. For the years ended* December 31, 2023and2022,* Milestone Scientific recognized approximately $0.9 million and $1.0 million of total employee compensation cost, respectively, recorded in general and administrative expenses on the statement of operations.

As of* December 31, 2023,*there was $1.5 million of total unrecognized compensation cost related to non-vested options. Milestone Scientific expects to recognize these costs over a weighted average period of 2.3 years.

A summary of option activity for employees under the plans and changes the year ended* December 31, 2023*is presented below:

There wereno options granted to employees during the year ended* December 31, 2023.*

A summary of option activity for non-employees under the plans and changes during the year ended* December 31, 2023*is presented below:

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The fair value of the non-employee options was estimated on the date of grant using the Black Scholes option-pricing model at the date of grant. For the years ended* December 31, 2023and2022,* Milestone Scientific recognized approximately $19,700 and $22,900 expense related to non-employee options, respectively.

A summary of restricted stock under the plans and changes during the year ended* December 31, 2023*is presented below:

As of* December 31, 2023,there were 18,947 restricted shares granted and deferred under the terms of an employment agreement with the Territory Manager of Milestone Scientific. Such shares will be issued to each party upon completion of 2 years of employment. For the years ended December 31, 2023and2022,* the Company recognized negative stock compensation expense of approximately ($15,000) and $(20,000), respectively. As of* December 31, 2023,*the total unrecognized compensation expense was $2,000 related to unvested restricted stock awards for Territory Managers, which the Company expects to recognize over an estimated weighted-average period of 0.21 years.

As of* December 31, 2023,the Company entered into restricted stock agreements with members of the Board of Directors of the Company. The Company granted 617,978 restricted stock awards with a fair market value of $0.89 per share. Such restricted stock vests as follows:25% on the grant date in June 2023,and 25% quarterly, on thefirst* day of the following months:* October 2023,** January 2024,and April 2024.These awards vest immediately upon a change of control as defined in the agreements. For the year ended December 31, 2023,the Company recognized approximately $576,000 for restricted stock expenses recorded in general and administrative expenses on the statement of operation. As of December 31, 2023,*the total unrecognized stock compensation expense was approximately $132,000 related to non-vested restricted stock awards with the members of the Board of Directors, which the Company expects to recognize over an estimated weighted average period of 0.25 years.

NOTE J–EMPLOYMENT CONTRACT AND CONSULTING AGREEMENTS

Consulting Agreements

K. Tucker Andersen, a significant stockholder of Milestone Scientific, has an agreement with Milestone Scientific to provide financial and business strategic services. Expenses recognized on this agreement were $100,000 for years ended* December 31, 2023and2022,* respectively.

The Director of Clinical Affairs’ royalty fee was approximately $485,000 and $442,000 for the years ended* December 31, 2023and2022,* respectively. Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of $156,000 and $154,000 for the year ended* December 31, 2023and2022,* respectively. As of* December 31, 2023,and2022,* Milestone Scientific owed the Director Clinical Affairs for royalties of approximately $114,000 and $120,000, respectively, which is included in accounts payable, related party and accrued expense, related party, in the consolidated balance sheet.

On* March 2, 2021,the Company entered into a Royalty Sharing Agreement with Leonard Osser, pursuant to which Mr. Osser sold, transferred and assigned to the Company all of his rights in and to a certain patent application as to which he is a co-inventor with Mark Hochman, a consultant to the Company, and the Company agreed to pay to Mr. Osser, beginning May 9, 2027,half of the royalty (2.5%) on net sales that would otherwise be payable to Mark and Claudia Hochman under their existing Technology Sale Agreement, dated January 1, 2005and amended from time to time, with the Company. In connection with the Royalty Sharing Agreement, the Hochman's agreed with the Company, pursuant to an addendum to such Technology Sale Agreement dated February 25, 2021,to reduce from 5% to 2.5% the payments due to them under their Technology Sale Agreement beginning on May 9, 2027,*and thereafter with respect to dental products embodying the invention.

F-16

As part of the Succession Plan of the Company, Mr. Osser agreed, pursuant to an agreement dated* April 6, 2021 (the “Succession Agreement”), to restructure certain of his existing agreements with the Company, which provide for additional and broader executive support, and at such time as he elects to step down as Interim Chief Executive Officer of the Company, to become the Vice Chairman of the Board of the Company. With respect to Mr. Osser’s July 2017Employment Agreement and July 2017Consulting Agreement (each as previously disclosed), the compensation under the Employment Agreement was modified to reduce the overall compensation by $100,000 to $200,000, split equally between a cash amount and an amount in shares, and the compensation under the Consulting Agreement was increased by $100,000 to $200,000, equally split between a cash amount and an amount in shares, which shares were formerly payable under the Employment Agreement. If the Company terminates Mr. Osser’s employment “Without Cause,” other than due to his death or disability, or if Mr. Osser terminates his employment for “Good Reason” (both as defined in the agreement), Mr. Osser is entitled to be paid inone* lump sum payment as soon as practicable following such termination: an amount equal to the aggregate present value (as determined in accordance with Section280G(d)(4) of the Code) of all compensation pursuant to this agreement from the effective date of termination hereunder through the remainder of the Employment Term. In connection with his acceptance of the Vice Chairman position and in consideration of his services as a member of the Board and agreement to provide certain additional general consulting services, Mr. Osser was granted options to purchase 2,000,000 shares of common stock, exercisable at the fair market value of the common stock on the date of grant, vesting over thefive-year period after he steps down as Interim Chief Executive Officer of the Company orten years from the date of grant, whichever shall end first. The Company believes that the effect of such existing agreements and the Succession Agreement, all of which relate to the period after such time Mr. Osser steps down as Interim Chief Executive Officer of the Company, collectively expand Mr. Osser’s consulting to and support of the Company beyond its Chinese operations to also include its medical and other products, while enhancing the retention aspects of the Company’s relationship with Mr. Osser. On* May 19, 2021,*Mr. Osser resigned as Interim Chief Executive Officer of the Company and assumed the role of Vice Chairman of the Board.

Compensation under the Employment Agreement and the Consulting Agreement is payable for9.5 years from* May 19, 2021.The Company recorded expenses of $200,000 related to the Employment Agreement for each of the years ended December 31, 2023and2022,* respectively. The Company recorded expenses of $200,000 related to the Consulting Agreement for each of the years ended* December 31, 2023and2022,* respectively.

On* January 1, 2022,the Company entered into an employment agreement with Mr. Arjan Haverhals. The employment term ends December 31, 2024,unless extended by mutual written agreement. Mr. Haverhals will serve as the President and Chief Executive Officer of the Company and such other senior executive positions as accepted and determined by the Board reasonably requests. As an executive, notwithstanding the fact that he is a director, Mr. Haverhals has board observer rights. The agreement calls for a base salary of $350,000 and bonus compensation of up to $400,000 per year, comprise ofthree* separate performance based bonuses each up to $100,000 per year, based upon the Company’s achievement ofthree (3) performance or financial goals, as established by the Compensation Committee in its reasonable discretion; and (ii) a discretionary bonus up to $100,000, as determined by the Compensation Committee, in its sole discretion. Satisfaction of bonus goals will be determined by the Compensation Committee from time to time in its reasonable discretion. Bonus compensation, if any, shall be payable annually in arrearsthirty-three percent (33%) in cash andsixty-seven percent (67%) in shares of the Company’s common stock. Mr. Haverhals will also be entitled to reimbursement of expenses,four weeks’ paid vacation, a car allowance and participation in company retirement plans and health insurance reimbursement. The agreement provides for the typical termination provisions. If Mr. Haverhals is terminated for other than for cause or termination by him for good reason, he will be paid as severance, his base compensation, and certain other benefits, as provided in the employment agreement, fortwo years after termination.

NOTE K —** INCOME TAXES**

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

At* December 31, 2023and2022,* we hadno uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Operations.No interest and penalties are present for periods open. Tax returns for the2020, 2021, and2022 years are subject to audit by federal and state jurisdictions.

Due to Milestone Scientific's history of operating losses, a full valuation allowances have been provided for all of Milestone Scientific's deferred tax assets. At* December 31, 2023and2022,* no recognition was given to the utilization of the remaining net operating loss carry forwards in each of these periods.

F-17

Deferred tax attributes resulting from differences between financial accounting amounts and tax bases of assets and liabilities at* December 31, 2023and2022* are as follows:

As of* December 31, 2023and2022,* federal net operating loss carry-forwards are approximately $74,500,000 and $71,700,000, respectively. As of* December 31, 2023,Milestone Scientific has $38,100,000 net operating losses generated before December 31, 2017that will be available to offset future income, if any, through December 2037.Additionally, as of December 31, 2023,Milestone Scientific has $36,400,000 of net operating losses generated in2018* or after that can be carried forward indefinitely.

State net operating losses were approximately $63,300,000 and $60,500,000 for the periods ended* December 31, 2023and2022,* respectively. Net operating losses will be available to offset future taxable income, if any, through* December 2041.*

The utilization of Milestone Scientific's net operating losses* maybe subject to a substantial limitation due to the "change of ownership provisions" under Section382* of the Internal Revenue Code and similar state provisions. Such limitation* may*result in the expiration of the net operating loss carry forwards before their utilization. Milestone Scientific has established a 100% valuation allowance for all of its deferred tax assets due to uncertainty as to their future realization.

Accounting for uncertainties in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure, and transition. No interest and penalties are present for periods open. Tax returns for the2020, 2021, and2022 years are subject to audit by federal and state jurisdictions.

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

F-18

NOTE L —** SEGMENT AND GEOGRAPHIC DATA**

The Company conducts its business throughtwo reportable segments: Dental and Medical. These segments offer different products and services to different customer base. The Company provides general corporate services to its segments; however, these services arenot considered when making operating decisions and assessing segment performance. These services are reported under “Corporate Services” below and these include costs associated with executive management, investor relations, patents, trademarks, licensing agreements, new instruments developments, financing activities and public company compliance.

The following tables present information about our reportable and operating segments:

F-19

The following table presents information about our operations by geographic area as of* December 31, 2023and2022.* Net sales by geographic area are based on the respective locations of our subsidiaries.

NOTE M-- CONCENTRATION

Milestone Scientific has informal arrangements withthird-party U.S. manufacturers of the STA,CompuDent andCompuMed devices, pursuant to which they manufacture these products under specific purchase orders but without any long-term contract or minimum purchase commitment. Consequently, advances on contracts have been classified as current on* December 31, 2023and2022.* The termination of the manufacturing relationship with any of these manufacturers could have a material adverse effect on Milestone Scientific’s ability to produce and sell its products. Although alternate sources of supply exist, and new manufacturing relationships could be established, Milestone Scientific would need to recover its existing tools or have new tools produced. Establishment of new manufacturing relationships could involve significant expense and delay. Any curtailment or interruption of the supply, because of termination of such a relationship, would have a material adverse effect on Milestone Scientific’s financial condition, business, and results of operations.

F-20

On* January 3, 2023,the Company launched an E-Commerce platform selling and shipping STA Single Tooth Anesthesia System® (STA) and handpieces directly to dental offices and dental groups within the U.S. For the year ended December**31,2023,* E-Commerce accounted for 48% of net product. The Company hadtwo distributors that accounted for 32%, and 11% amount of revenue respectively for the year ended* December 31, 2022.*

We hadthree distributors that accounted for 39%,38%, and 15% of accounts receivable, respectively, year ended* December 31, 2023.We hadtwo customers that accounted for 33%, and 20% of accounts receivable, respectively as of December 31, 2022.*

As of* December 31, 2023we hadthree vendors that accounted for 37%, and 17% and 12%, respectively, of accounts payable and accounts payable related party. We hadone vendor that accounted for 42% of accounts payable and accounts payable related party as of December 31, 2022.*

NOTE N -- RELATED PARTY TRANSACTIONS

United Systems

Milestone Scientific has a supply agreement with United Systems (whose controlling shareholder, Tom Cheng, is a significant stockholder of Milestone Scientific), the principal supplier of its handpieces, pursuant to which it procures manufactured products under specific purchase orders, but without minimum purchase commitments. Purchases from this supplier were approximately 2.3 million and $3.4 million for thetwelve months ended* December 31, 2023,and2022,* respectively. As* December 31, 2023,and December 31, 2022,Milestone Scientific owed this supplier approximately $402,000 and $819,000, respectively, which is included in accounts payable and accrued expenses related party on the consolidated balance sheets. In June 2021,the Company signed aten*-year agreement with United Systems for supplier of the handpieces.

Other

In* December 31, 2023and2022* the Company had approximately $270,000 and $630,000 sales to Milestone China or agents of Milestone China, an entity in which the Company formerly had an ownership interest terminating in2021.

K. Tucker Andersen, a significant stockholder of Milestone Scientific, has an agreement with Milestone Scientific to provide financial and business strategic services. Expenses recognized on this agreement were $100,000 for years ended* December 31, 2023and2022,* respectively.

Director of Clinical Affairs

The Director of Clinical Affairs’ royalty fee was approximately $485,000 and $442,000 for the years ended* December 31, 2023and2022,* respectively. Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of $156,000 and $154,000 for the year ended* December 31, 2023and2022,* respectively. As of* December 31, 2023,and2022,* Milestone Scientific owed the Director Clinical Affairs for royalties of approximately $114,000 and $120,000, respectively, which is included in accounts payable, related party and accrued expense, related party, in the consolidated balance sheet.

Director

On* March 2, 2021,the Company entered into a Royalty Sharing Agreement with Leonard Osser, pursuant to which Mr. Osser sold, transferred and assigned to the Company all of his rights in and to a certain patent application as to which he is a co-inventor with Mark Hochman, a consultant to the Company, and the Company agreed to pay to Mr. Osser, beginning May 9, 2027,half of the royalty (2.5%) on net sales that would otherwise be payable to Mark and Claudia Hochman under their existing Technology Sale Agreement, dated January 1, 2005and amended from time to time, with the Company. In connection with the Royalty Sharing Agreement, the Hochman's agreed with the Company, pursuant to an addendum to such Technology Sale Agreement dated February 25, 2021,to reduce from 5% to 2.5% the payments due to them under their Technology Sale Agreement beginning on May 9, 2027,*and thereafter with respect to dental products embodying the invention.

As part of the Succession Plan of the Company, Mr. Osser agreed, pursuant to an agreement dated* April 6, 2021 (*the “Succession Agreement”), to restructure certain of his existing agreements with the Company, which provide for additional and broader executive support, and at such time as he elects to step down as Interim Chief Executive Officer of the Company, to become the Vice Chairman of the Board of the Company.

F-21

With respect to Mr. Osser’s* July 2017Employment Agreement and July 2017Consulting Agreement (each as previously disclosed), the compensation under the Employment Agreement was modified to reduce the overall compensation by $100,000 to $200,000, split equally between a cash amount and an amount in shares, and the compensation under the Consulting Agreement was increased by $100,000 to $200,000, equally split between a cash amount and an amount in shares, which shares were formerly payable under the Employment Agreement. If the Company terminates Mr. Osser’s employment “Without Cause,” other than due to his death or disability, or if Mr. Osser terminates his employment for “Good Reason” (both as defined in the agreement), Mr. Osser is entitled to be paid inone* lump sum payment as soon as practicable following such termination: an amount equal to the aggregate present value (as determined in accordance with Section280G(d)(4) of the Code) of all compensation pursuant to this agreement from the effective date of termination hereunder through the remainder of the Employment Term. In connection with his acceptance of the Vice Chairman position and in consideration of his services as a member of the Board and agreement to provide certain additional general consulting services, Mr. Osser was granted options to purchase 2,000,000 shares of common stock, exercisable at the fair market value of the common stock on the date of grant, vesting over thefive-year period after he steps down as Interim Chief Executive Officer of the Company orten years from the date of grant, whichever shall end first. The Company believes that the effect of such existing agreements and the Succession Agreement, all of which relate to the period after such time Mr. Osser steps down as Interim Chief Executive Officer of the Company, collectively expand Mr. Osser’s consulting to and support of the Company beyond its Chinese operations to also include its medical and other products, while enhancing the retention aspects of the Company’s relationship with Mr. Osser. On* May 19, 2021,*Mr. Osser resigned as Interim Chief Executive Officer of the Company and assumed the role of Vice Chairman of the Board.

Compensation under the Employment Agreement and the Consulting Agreement is payable for9.5 years from* May 19, 2021.The Company recorded expenses of $200,000 related to the Employment Agreement for each of the years ended December 31, 2023and2022,* respectively. The Company recorded expenses of $200,000 related to the Consulting Agreement for each of the years ended* December 31, 2023and2022,* respectively.

NOTE O —** COMMITMENTS**

(1) Contract Manufacturing Agreement

Milestone Scientific has informal arrangements withthird-party manufacturers of the STA, CompuDent® and CompuMed® devices, pursuant to which they manufacture these products under specific purchase orders but without any long-term contract or minimum purchase commitment. The company entered into a new purchase commitment for the delivery of 2,200 STA CompuDent® instruments. As of* December 31, 2023,the purchase order commitment was approximately $2.3 million, and approximately $1.3 million was paid and reported in advance on contracts in the consolidated balance sheet. As of December 31, 2022,the purchase order commitment was approximately $1.7 million, and approximately $1.2 million was paid and reported in advance on contracts in the consolidated balance sheet. As of December 31, 2023and2022* the company also has advances on an open purchase order for long lead items for a future purchase order for the manufacturing of Epidural instrument of approximately $76,000, respectively.

(2) ** Leases**

Operating Leases

In* August 2019,the Company made the decision tonot* renew its existing office lease for its corporate headquarters located in Livingston, New Jersey and instead signed a newseven-year lease in a new facility located in Roseland, New Jersey (the “Roseland Facility”), which commenced of* January 8, 2021.Under the Roseland Facility lease, rent payments commence on April 1, 2021,and the monthly lease payments escalate annually on January 1of each year, and range from $9,275 to $10,898 per month over the lease term. The Company is also required to pay a fixed electric charge equal to $2.00 per square foot which is paid in equal monthly installments over the lease term or $11,130 annually. These fixed monthly payments have been included in the measurement of the operating lease liability and related operating lease right-of-use asset as the Company has elected the practical expedient tonot* separate lease and non-lease components for all leases. The Company is also required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises more than new base year amounts, which are accounted for as variable lease expenses.

As of* December 31, 2023,total finance right-of-use assets were $8,998 and total finance liabilities were $10,698 of which $10,264 and $434. were classified as current and non-current, respectively. As of December 31, 2023total operating right-of use assets were $355,235 and total operating lease liabilities were $385,280, of which $103,427 and $281,853 were classified as current and non-current, respectively. As of December 31, 2022,total finance right-of-use assets were $17,645 and total finance liabilities were $20,063 of which $9,365 and $10,698 were classified as current and non-current, respectively. As of December 31, 2022,*total operating right-of use assets were $443,685 and total operating lease liabilities were $476,980, of which $91,701 and $385,279 were classified as current and non-current, respectively.

F-22

The Company identified and assessed the following significant assumptions in recognizing its right-of-use assets and corresponding lease liabilities:

The components of lease expense were as follows:

F-23

NOTE P —** BENEFIT PLAN**

Milestone Scientific has a Defined Contribution Plan that allows eligible employees to contribute part of their salary through payroll deductions. Milestone Scientific doesnot contribute to this plan, but does pay the administrative costs of the plan, which werenot significant.

NOTE Q —** SUBSEQUENT EVENTS**

In Connection with the Company's capital raise on* December 10, 2023,on January 12, 2024*the underwriter exercised its over-allotment option as to 372,110 shares of common stock for net proceeds after discounts and commission of $216,847.

Since the year ended* December 31, 2023,*the Company issued 103,500 shares of common stock for warrants exercised at $0.50 for proceeds of $51,647.