Milestone Scientific(MLSS) - 2025 Q2 - Quarterly Report

Cover Page This section provides key administrative details of the Form 10-Q filing for Milestone Scientific Inc. for the quarter ended June 30, 2025 - The filing is a Form 10-Q for Milestone Scientific Inc. for the quarter ended June 30, 2025[1] - Milestone Scientific Inc. is classified as a non-accelerated filer and a smaller reporting company[3] - As of August 14, 2025, there were 78,559,147 shares of Common Stock outstanding[5] Forward-Looking Statements This section outlines the inherent risks and uncertainties associated with forward-looking statements, which may cause actual results to differ materially from projections - The report contains forward-looking statements subject to numerous risks and uncertainties, which may cause actual results to differ materially from expectations[10] - Key risks include continued operating losses, the need for additional funding, early stage of medical products, reliance on third-party manufacturers, and competitive developments[10] PART I—FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Condensed Consolidated Financial Statements This section includes the unaudited condensed consolidated financial statements, comprising the Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and accompanying notes, providing a detailed financial overview for the periods presented Balance Sheets as of June 30, 2025 (Unaudited) and December 31, 2024 This section presents the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $1,274,314 | $3,258,058 | | Total current assets | $7,630,828 | $9,286,554 | | Total assets | $8,050,830 | $9,797,072 | | Total current liabilities | $3,767,670 | $3,744,127 | | Convertible notes payable, related parties | $800,000 | $- | | Total liabilities | $4,710,558 | $3,964,372 | | Total stockholders' equity | $3,340,272 | $5,832,700 | - Total assets decreased by $1.7 million from December 31, 2024, to June 30, 2025, primarily due to a reduction in cash and cash equivalents[13] - Total liabilities increased by $0.7 million, driven by the issuance of $0.8 million in convertible notes payable to related parties[13] Statements of Operations for the three and six months ended June 30, 2025 and 2024 (Unaudited) This section details the company's financial performance, including product sales, gross profit, and net loss for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric | 2025 | 2024 | Change | | :-------------------------- | :----------- | :----------- | :----------- | | Product sales, net | $2,323,466 | $1,853,764 | $469,702 | | Gross profit | $1,617,606 | $1,411,204 | $206,402 | | Loss from operations | $(1,484,631) | $(1,780,423) | $295,792 | | Gain on sale of net operating losses | $- | $1,983,095 | $(1,983,095) | | Net loss | $(1,483,110) | $223,638 | $(1,706,748) | | Basic and Diluted EPS | $(0.02) | $0.00 | $(0.02) | Condensed Consolidated Statements of Operations (Six Months Ended June 30) | Metric | 2025 | 2024 | Change | | :-------------------------- | :----------- | :----------- | :----------- | | Product sales, net | $4,555,886 | $4,102,609 | $453,277 | | Gross profit | $3,265,041 | $3,087,307 | $177,734 | | Loss from operations | $(3,482,484) | $(3,245,491) | $(236,993) | | Gain on sale of net operating losses | $- | $1,983,095 | $(1,983,095) | | Net loss | $(3,477,696) | $(1,216,891) | $(2,260,805) | | Basic and Diluted EPS | $(0.04) | $(0.02) | $(0.02) | - The significant increase in net loss for both periods in 2025 is primarily due to the absence of the $2.0 million gain on sale of net operating losses recognized in 2024[14][106] Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2025 and 2024 (Unaudited) This section outlines the changes in stockholders' equity, reflecting net losses, stock-based compensation, and common stock issuances for the periods presented - Total stockholder equity decreased from $5.8 million at January 1, 2025, to $3.3 million at June 30, 2025[16] - The decrease in equity is primarily attributable to net losses of $(2.0 million) for the three months ended March 31, 2025, and $(1.5 million) for the three months ended June 30, 2025[16] - Changes also reflect stock-based compensation expenses and common stock issued for consulting services[16] Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (Unaudited) This section presents the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Cash Flow Category | 2025 | 2024 | Change | | :----------------------------------- | :------------- | :------------- | :------------- | | Net cash used in operating activities | $(2,772,273) | $(434,473) | $(2,337,800) | | Net cash (used in) provided by investing activities | $(5,776) | $2,969,977 | $(2,975,753) | | Net cash provided by financing activities | $794,305 | $238,889 | $555,416 | | Net (decrease) increase in cash | $(1,983,744) | $2,774,393 | $(4,758,137) | - Cash used in operating activities increased significantly by $2.3 million, primarily due to a larger net loss in 2025[119] - Investing activities shifted from providing $3.0 million in 2024 (due to marketable securities sale) to using $5,776 in 2025[120] Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanatory notes to the condensed consolidated financial statements, offering additional context and disclosures for various accounts and transactions NOTE 1 — ORGANIZATION AND BUSINESS This note describes Milestone Scientific Inc.'s core business as a biomedical technology company focused on computer-controlled anesthetic delivery devices for dental and medical markets - Milestone Scientific Inc. is a biomedical technology company focused on proprietary, computer-controlled anesthetic delivery devices for dental and medical markets[21][92] - Key trademarks include CompuDent®, STA Single Tooth Anesthesia System® (dental), and CompuFlo® Epidural Computer Controlled Anesthesia System (medical)[20][21][95] - The company holds over 317 U.S. and foreign patents related to drug delivery methodologies[96] NOTE 2 — GOING CONCERN AND LIQUIDITY This note addresses the company's going concern status due to recurring losses and the need for additional capital, outlining management's plans to secure funding - Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses, an accumulated deficit of $131.5 million, and the need for additional capital[23][24][124] - As of June 30, 2025, cash and cash equivalents were approximately $1.3 million, and working capital was approximately $3.9 million[23][123] - Management plans to seek additional funding through equity or debt financings and aims to generate positive cash flows by increasing revenue and reducing operating expenses[25][26][126] NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details the significant accounting policies used in preparing the condensed consolidated financial statements, including revenue recognition and segment reporting - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information[28] - Revenue from product sales is recognized at the point of shipment, with no post-sale installation or maintenance obligations[31] - The company disaggregates revenue by its two operating segments (Dental and Medical) and by geographical market[36][37] NOTE 4 — INVENTORIES This note provides a breakdown of inventory composition, including finished goods and component parts, and details the allowance for slow-moving medical finished goods Inventories Composition | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :----------- | :---------------- | | Dental finished goods | $3,677,357 | $3,640,391 | | Medical finished goods | $121,815 | $- | | Component parts and other materials | $97,845 | $72,824 | | Total inventories | $3,897,017 | $3,713,215 | - The company maintains an allowance of approximately $1.1 million for slow-moving Medical finished goods due to the slow adoption of epidural instruments and handpieces[48] NOTE 5 — ADVANCES ON CONTRACTS This note outlines the company's advances on contracts, representing funding received for future deliveries of STA devices, epidural instruments, and replacement parts Advances on Contracts | Date | Amount | | :---------------- | :----------- | | June 30, 2025 | $1,131,284 | | December 31, 2024 | $1,275,260 | - Advances on contracts represent funding for future STA devices, epidural instruments, and epidural replacement parts[49] NOTE 6 — CONVERTIBLE NOTE PAYABLE, RELATED PARTY This note details the issuance of convertible promissory notes to related parties, including terms, interest rates, and conversion features into common stock - On April 9, 2025, the Company issued $0.8 million in promissory notes to directors, due April 9, 2028, with interest at prime less 2.50%[50] - The notes are convertible into common stock by the holder at any time and by the Company at maturity, with a conversion rate based on the fair value of common stock (not less than $0.50)[51] - As of June 30, 2025, these notes were convertible into 963,855 shares of common stock[51] NOTE 7 — STOCKHOLDERS' EQUITY This note describes changes in stockholders' equity, including public offerings, shares to be issued for services, and the impact of net losses on total equity - In January 2024, a public offering resulted in net proceeds of $192,156 from the exercise of an over-allotment option for 372,110 shares[52] Shares-to-be-issued Outstanding | Date | Shares Outstanding | | :---------------- | :----------------- | | June 30, 2025 | 3,708,663 | | June 30, 2024 | 3,184,683 | - These shares are to be issued to employees, officers, directors, and non-employees for services rendered, with issuance deferred under various agreements[53][54] NOTE 8 — STOCK OPTION PLANS This note details employee stock-based compensation expense, unrecognized compensation costs, and the vesting status of restricted stock awards - Total employee stock-based compensation expense was approximately $0.3 million for the six months ended June 30, 2025[58] - As of June 30, 2025, there was $0.5 million of unrecognized compensation cost related to non-vested options, expected to be recognized over a weighted average period of 0.75 years[59] - Restricted stock awards granted in June 2024 were fully vested by April 2025, resulting in no unrecognized compensation expense as of June 30, 2025[61] NOTE 9 — INCOME TAXES This note discusses the company's income tax position, including valuation allowances for deferred tax assets and the gain from the sale of net operating losses - Milestone Scientific has a 100% valuation allowance for all its deferred tax assets due to uncertainty regarding their future realization[62] - In April 2024, the company received approximately $2.0 million from the sale of New Jersey net operating losses (NOLs), recorded as a gain[63] - The company is required to maintain a physical presence in New Jersey for 5 years after the NOL sale or face a potential liability of up to $2.2 million[64] NOTE 10 — SEGMENT AND GEOGRAPHIC DATA This note provides financial data disaggregated by the company's Dental and Medical operating segments, including product sales, gross margin, and operating income or loss - The company operates in two reportable segments: Dental and Medical, with financial performance assessed by the CEO based on product sales and operating income/loss[64] Segment Performance (Six Months Ended June 30, 2025) | Metric | Dental | Medical | Corporate | Grand Total | | :-------------------------- | :----------- | :----------- | :----------- | :----------- | | Product sales, net | $4,472,536 | $83,350 | $- | $4,555,886 | | Gross Margin | $3,182,775 | $82,266 | $- | $3,265,041 | | Operating income (loss) | $634,979 | $(844,402) | $(3,273,061) | $(3,482,484) | Segment Performance (Six Months Ended June 30, 2024) | Metric | Dental | Medical | Corporate | Grand Total | | :-------------------------- | :----------- | :----------- | :----------- | :----------- | | Product sales, net | $4,076,189 | $26,420 | $- | $4,102,609 | | Gross Margin | $3,065,234 | $22,073 | $- | $3,087,307 | | Operating income (loss) | $845,601 | $(1,014,700) | $(3,076,392) | $(3,245,491) | NOTE 11 — CONCENTRATIONS This note highlights the company's reliance on third-party manufacturers and key distributors, along with the contribution of e-commerce sales to net product sales - The company relies on informal arrangements with third-party U.S. manufacturers for its STA devices and epidural instruments; termination of these relationships could have a material adverse effect[69] E-Commerce Sales Contribution to Net Product Sales | Period | % of Net Product Sales | | :-------------------------- | :--------------------- | | Three months ended June 30, 2025 | 53% | | Three months ended June 30, 2024 | 66% | | Six months ended June 30, 2025 | 50% | | Six months ended June 30, 2024 | 59% | - As of June 30, 2025, three distributors accounted for 32%, 16%, and 13% of accounts receivable, and four suppliers accounted for 25%, 24%, 12%, and 11% of accounts payable[71][72] NOTE 12 — RELATED PARTY TRANSACTIONS This note details transactions with related parties, including purchases from suppliers, royalty fees, and compensation arrangements with directors and officers - Purchases from United Systems, the principal handpiece supplier, were approximately $0.8 million for the six months ended June 30, 2025[73] - Royalty fees to the Director of Clinical Affairs were approximately $0.2 million for the six months ended June 30, 2025, in addition to consulting fees[75] - Leonard Osser (Vice Chairman) incurred $0.1 million in expenses each for his Employment and Consulting Agreements for the six months ended June 30, 2025[80] - Arjan J. Haverhals (Director) commenced a consulting agreement on January 1, 2025, with an annual fee of $0.4 million and 912,736 shares to be issued after his CEO resignation[82][84] NOTE 13 — COMMITMENTS This note outlines the company's significant commitments, including purchase obligations for instruments, advances for development, and remaining lease terms - As of June 30, 2025, the company had a purchase commitment of approximately $2.5 million for 2,000 STA instruments, with $0.8 million already paid as advances[85] - Approximately $0.3 million was recorded in advances for the development of the next-generation STA instrument[85] Weighted Average Remaining Lease Terms (June 30, 2025) | Lease Type | Remaining Term | | :-------------------------- | :------------- | | Finance leases | 4.50 years | | Operating leases | 1.75 years | NOTE 14 — SUBSEQUENT EVENTS This note discloses significant events occurring after the reporting period, including the appointment of a new President and CEO and related compensation arrangements - Effective July 31, 2025, Eric Hines was appointed President and Chief Executive Officer and a director of the Company[89] - Mr. Hines' compensation includes a base salary of $15 thousand per month for the initial term and $25 thousand per month for the extended term[89] - He was granted options for 2,000,000 shares of Common Stock, with 10% vesting on the grant date and the remaining 90% vesting in three equal annual installments[89] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, highlighting its biomedical technology focus, proprietary injection technologies, and strategic objectives. It details the results of operations for the three and six months ended June 30, 2025, compared to 2024, and discusses liquidity and capital resources, including the ongoing going concern issue OVERVIEW This section provides an overview of Milestone Scientific's business, focusing on its computer-controlled injection technologies and strategic transition to a commercially focused medical device company - Milestone Scientific is a biomedical technology company focused on pioneering computer-controlled injection technologies for medical and dental markets[92][93] - The company's proprietary DPS Dynamic Pressure Sensing Technology® System is a platform for next-generation devices, enabling precise and virtually painless injections[94] - Milestone Scientific is transitioning to a commercially focused medical device company, aiming to expand the global footprint of its CompuFlo Epidural and CathCheck System, supported by a recent chronology-specific CPT Code for reimbursement[96][97] Results of Operations This section analyzes the company's financial performance, detailing product sales, gross profit, and expenses for the three and six months ended June 30, 2025 and 2024 Three months ended June 30, 2025 compared to three months ended June 30, 2024 This section compares the company's financial results for the three months ended June 30, 2025, against the same period in 2024, highlighting changes in sales, gross profit, and expenses Net Sales (Three Months Ended June 30) | Segment | 2025 | 2024 | Change | | :------ | :----------- | :----------- | :----------- | | Dental | $2,291,366 | $1,834,764 | $456,602 | | Medical | $32,100 | $19,000 | $13,100 | | Total sales, net | $2,323,466 | $1,853,764 | $469,702 | - Consolidated gross profit increased by approximately $0.2 million to $1.6 million[108] - Research and development expenses decreased by approximately $0.3 million to $52,000, primarily due to a delay in the development of the next-generation STA Single Tooth Anesthesia System[110] Six months ended June 30, 2025 compared to six months ended June 30, 2024 This section compares the company's financial results for the six months ended June 30, 2025, against the same period in 2024, detailing changes in sales, gross profit, and administrative expenses Net Sales (Six Months Ended June 30) | Segment | 2025 | 2024 | Change | | :------ | :----------- | :----------- | :----------- | | Dental | $4,472,536 | $4,076,189 | $396,347 | | Medical | $83,350 | $26,420 | $56,930 | | Total sales, net | $4,555,886 | $4,102,609 | $453,277 | - Consolidated gross profit increased by approximately $0.2 million to $3.3 million[113] - Selling, general and administrative expenses increased by approximately $0.4 million to $6.3 million, driven by increases in quality control, royalty expenses, travel expenses, and professional fees[114][115] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations, discussing cash flows, capital needs, and the going concern issue Cash Flows This section summarizes the company's cash flow activities from operations, investing, and financing for the six months ended June 30, 2025 and 2024 Cash Flow Summary (Six Months Ended June 30) | Cash Flow Category | 2025 | 2024 | Change | | :----------------------------------- | :------------- | :------------- | :------------- | | Net cash used in operating activities | $(2,772,273) | $(434,473) | $(2,337,800) | | Net cash (used in) provided by investing activities | $(5,776) | $2,969,977 | $(2,975,753) | | Net cash provided by financing activities | $794,305 | $238,889 | $555,416 | | Net (decrease) increase in cash | $(1,983,744) | $2,774,393 | $(4,758,137) | Operating Activities This section analyzes cash flows generated from or used in the company's primary business operations for the six months ended June 30, 2025 - Net cash used in operating activities increased by $2.3 million to $(2.8 million) for the six months ended June 30, 2025, primarily due to a $2.3 million increase in net loss[119] Investing Activities This section details cash flows related to the acquisition and disposal of long-term assets and investments for the six months ended June 30, 2025 - Cash flows from investing activities decreased by $3.0 million, shifting from providing $3.0 million in 2024 to using $(5,776) in 2025[120] - This change was primarily due to the sale of $3.0 million of marketable securities in 2024, which did not recur in 2025 as the company had no marketable securities[120] Financing Activities This section outlines cash flows from debt and equity transactions, including the issuance of convertible notes and public offerings, for the six months ended June 30, 2025 - Cash flows from financing activities increased by $0.6 million to $0.8 million for the six months ended June 30, 2025[121] - This increase was driven by the issuance of $0.8 million in convertible notes in 2025, compared to a $0.2 million public placement offering in 2024[121] Consideration of Company's ability to continue as a going concern This section addresses the substantial doubt regarding the company's ability to continue as a going concern, citing recurring losses and plans for future financing - The company's recurring losses, accumulated deficit of $131.5 million, and significant cash used in operating activities ($2.8 million for H1 2025) raise substantial doubt about its ability to continue as a going concern for the next year[123][124] - Management plans to seek additional equity or debt financing and generate positive cash flows from increased revenue and reduced expenses to address the going concern issue[125][126] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Milestone Scientific Inc. is not required to provide detailed quantitative and qualitative disclosures about market risk - Milestone Scientific Inc. is exempt from providing detailed market risk disclosures due to its status as a "smaller reporting company"[127] Item 4. Controls and Procedures Management, including the CEO and Principal Accounting Officer, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective at a reasonable assurance level. No material changes were made to internal control over financial reporting during the period - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[129] - No material changes were made to internal control over financial reporting during the period ended June 30, 2025[130] PART II—OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, unresolved staff comments, cybersecurity, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The report does not contain specific information regarding legal proceedings, as it is not explicitly detailed in the provided content for this item - No specific information regarding legal proceedings is provided in this section of the report[8] Item 1A. Risk Factors The company highlights new and ongoing risks, including potential adverse effects from changes to U.S. tariff and import/export regulations, particularly concerning sourcing from China and international sales. Government actions on tariffs and research grants may also impede research and capital raising efforts - Changes to United States tariff and import/export regulations may have a material adverse effect on the company's business, financial condition, and results of operations, especially concerning sourcing from China and international sales[132] - Government actions to impose tariffs and limit research grants and other funding may impede the company's ability to conduct research and raise capital[133] Item 1B. Unresolved Staff Comments There are no unresolved staff comments to report - There are no unresolved staff comments[134] Item 1C. Cybersecurity The report indicates no specific disclosures regarding cybersecurity for this period - No specific cybersecurity disclosures are provided in this section[135] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is marked as "Not applicable," indicating no unregistered sales of equity securities or use of proceeds to report for the period - This item is marked as 'Not applicable'[136] Item 3. Defaults Upon Senior Securities This item is marked as "Not applicable," indicating no defaults upon senior securities to report for the period - This item is marked as 'Not applicable'[137] Item 4. Mine Safety Disclosures This item is marked as "Not applicable," indicating no mine safety disclosures are relevant to the company - This item is marked as 'Not applicable'[138] Item 5. Other Information This item is marked as "Not applicable," indicating no other material information to report that is not covered elsewhere in the filing - This item is marked as 'Not applicable'[139] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications (Rule 13a-14(a) and Section 1350) and Inline XBRL documents - Exhibits include Rule 13a-14(a) Certification, Section 1350 Certifications, and various Inline XBRL documents[140] Signatures This section provides the official signatures of the Chief Executive Officer and Vice President of Finance, certifying the accuracy of the report as of August 14, 2025 - The report was signed by Eric Hines, Chief Executive Officer, and Keisha Harcum, Vice President of Finance, on August 14, 2025[144]