Milestone Scientific(MLSS) - 2023 Q2 - Quarterly Report

FORM 10-Q Filing Information This section provides basic identification and filing status for Milestone Scientific Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 Registrant Details This section details Milestone Scientific Inc.'s identification, filing status, and classification as a smaller reporting company for its Q2 2023 Form 10-Q - Milestone Scientific Inc. is filing its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023[1] - The company is incorporated in Delaware with Commission file number 001-14053[1] - Milestone Scientific Inc. is classified as a 'Smaller reporting company' and is not a 'well-known seasoned issuer' or an 'emerging growth company'[1] - As of August 14, 2023, there were 71,365,659 shares of Common Stock, $0.001 par value, outstanding[1] Table of Contents This section outlines the report's structure, detailing financial information in Part I and other disclosures in Part II PART I—FINANCIAL INFORMATION Part I of the report covers the company's financial information, including condensed consolidated financial statements, management's discussion and analysis of financial condition and results of operations, quantitative and qualitative disclosures about market risk, and controls and procedures PART II—OTHER INFORMATION Part II outlines other relevant information such as legal proceedings, risk factors, unregistered sales of equity securities, defaults upon senior securities, mine safety disclosures, other information, and exhibits Forward-Looking Statements and Trademarks This section provides cautionary statements regarding forward-looking information and lists the company's registered trademarks Forward-Looking Statements This section provides cautionary statements regarding forward-looking information, emphasizing that actual results may differ materially due to various risks and uncertainties - Forward-looking statements are subject to numerous risks and uncertainties, and actual results may differ materially[5] - Key risks include continued operating losses, potential inability to raise additional funding, early-stage acceptance of medical products, reliance on two third-party manufacturers, and risks associated with international sales (including China)[5] - Milestone Scientific disclaims any intent or obligation to update forward-looking statements[5] Trademarks Milestone Scientific Inc. owns several registered U.S. trademarks related to its dental and medical technologies - Milestone Scientific owns registered U.S. trademarks including CompuDent®, CompuMed®, CompuFlo®, DPS Dynamic Pressure Sensing technology®, Milestone Scientific ®, CathCheck®, the Milestone logo ®, SafetyWand®, STA Single Tooth Anesthesia Device®, and The Wand ®[6] PART I—FINANCIAL INFORMATION Part I presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Milestone Scientific Inc. and its subsidiaries, including balance sheets, statements of operations, statements of changes in stockholders' equity, statements of cash flows, and comprehensive notes detailing accounting policies, liquidity, segment data, and commitments Condensed Consolidated Balance Sheets The balance sheets provide a snapshot of the company's financial position as of June 30, 2023, and December 31, 2022, showing a decrease in total assets and stockholders' equity Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2023 | December 31, 2022 | Change (Absolute) | Change (%) | | :-------------------------------- | :-------------- | :---------------- | :---------------- | :--------- | | Cash and cash equivalents | $3,701,453 | $8,715,279 | $(5,013,826) | -57.53% | | Marketable securities | $1,981,180 | $- | $1,981,180 | N/A | | Total current assets | $10,500,076 | $12,970,504 | $(2,470,428) | -19.05% | | Total assets | $11,151,452 | $13,702,086 | $(2,550,634) | -18.61% | | Total current liabilities | $3,109,356 | $3,299,675 | $(190,319) | -5.77% | | Total liabilities | $3,449,789 | $3,695,652 | $(245,863) | -6.65% | | Total stockholders' equity | $7,701,663 | $10,006,434 | $(2,304,771) | -23.03% | Condensed Consolidated Statements of Operations The statements of operations show improved financial performance for the three and six months ended June 30, 2023, with significant increases in product sales and gross profit, leading to a reduced net loss compared to the prior year periods Consolidated Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2023 | 2022 | Change (Absolute) | Change (%) | | :-------------------------------- | :------------ | :------------ | :---------------- | :--------- | | Product sales, net | $2,909,966 | $1,648,368 | $1,261,598 | 76.54% | | Gross profit | $1,890,059 | $680,648 | $1,209,411 | 177.69% | | Selling, general and administrative expenses | $3,937,281 | $3,282,322 | $654,959 | 19.95% | | Research and development expenses | $213,647 | $266,560 | $(52,913) | -19.85% | | Loss from operations | $(2,277,550) | $(2,884,879) | $607,329 | -21.05% | | Net loss attributable to Milestone Scientific Inc. | $(2,216,317) | $(2,858,481) | $642,164 | -22.47% | | Net loss per share (Basic and Diluted) | $(0.03) | $(0.04) | $0.01 | -25.00% | Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2023 | 2022 | Change (Absolute) | Change (%) | | :-------------------------------- | :------------ | :------------ | :---------------- | :--------- | | Product sales, net | $5,507,564 | $4,349,270 | $1,158,294 | 26.63% | | Gross profit | $3,778,682 | $2,363,074 | $1,415,608 | 59.82% | | Selling, general and administrative expenses | $7,011,012 | $6,397,948 | $613,064 | 9.58% | | Research and development expenses | $353,994 | $731,027 | $(377,033) | -51.58% | | Loss from operations | $(3,620,226) | $(4,799,361) | $1,179,135 | -24.57% | | Net loss attributable to Milestone Scientific Inc. | $(3,523,983) | $(4,760,204) | $1,236,221 | -25.97% | | Net loss per share (Basic and Diluted) | $(0.05) | $(0.07) | $0.02 | -28.57% | Condensed Consolidated Statements of Changes in Stockholders' Equity The statements detail changes in stockholders' equity for the three and six months ended June 30, 2023 and 2022, reflecting impacts from stock-based compensation, common stock issuances for services and bonuses, and net losses - Total stockholders' equity decreased from $10,006,434 at January 1, 2023, to $7,701,663 at June 30, 2023[11] - Stock-based compensation contributed $793,102 to additional paid-in capital for the six months ended June 30, 2023[11] - Net loss for the six months ended June 30, 2023, was $(3,523,983) attributable to Milestone Scientific Inc., impacting accumulated deficit[10][11] Condensed Consolidated Statements of Cash Flows The statements of cash flows indicate a significant net decrease in cash and cash equivalents for the six months ended June 30, 2023, primarily driven by cash used in operating activities and a substantial investment in marketable securities Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Metric | 2023 | 2022 | Change (Absolute) | Change (%) | | :-------------------------------- | :------------ | :------------ | :---------------- | :--------- | | Net cash used in operating activities | $(3,027,126) | $(3,801,065) | $773,939 | -20.36% | | Net cash (used in) provided by investing activities | $(1,982,376) | $85 | $(1,982,461) | -2332307.06% | | Net cash used in financing activities | $(4,324) | $(4,234) | $(90) | 2.13% | | Net decrease in cash and cash equivalents | $(5,013,826) | $(3,805,214) | $(1,208,612) | 31.76% | | Cash and cash equivalents at end of period | $3,701,453 | $10,959,132 | $(7,257,679) | -66.22% | - A significant portion of cash used in investing activities in 2023 was due to the purchase of marketable securities ($1,981,180)[15] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures supporting the condensed consolidated financial statements, covering the company's organization, liquidity, significant accounting policies, and specific financial line items NOTE 1 — Organization and Business Milestone Scientific Inc. is a biomedical technology company focused on computer-controlled anesthetic delivery devices for dental and medical applications, including the STA Single Tooth Anesthesia System® and CompuFlo® Epidural System - Milestone Scientific Inc. develops and commercializes proprietary, computer-controlled anesthetic delivery devices for medical and dental use, such as the DPS Dynamic Pressure Sensing Technology® System[19][20] - Key products include CompuDent® and STA Single Tooth Anesthesia System® for dentistry, sold in the U.S., Canada, and 38 other countries, and the FDA-cleared CompuFlo® Epidural Computer Controlled Anesthesia System for spinal regions[19] - The company's common stock trades on the NYSE American under the symbol 'MLSS' since June 1, 2015[20] NOTE 2 — Liquidity and Uncertainties Despite accumulated losses of $120 million since inception and operating losses of $3.6 million for the six months ended June 30, 2023, management believes current cash and dental business support are sufficient to cover operating requirements and medical device commercialization for the next twelve months - Milestone Scientific has incurred total losses of $120 million since inception and operating losses of $3.6 million for the six months ended June 30, 2023[21] - Management believes the company has sufficient cash and dental business support to meet operating requirements for the next twelve months, concluding no substantial doubt about its ability to continue as a going concern[21][22] - The company's continued operations depend on its ability to raise additional capital until it achieves profitability[22] - The Ukraine conflict has led to decreased international sales to Ukraine and halted sales to Russia, impacting business and results of operations[24] NOTE 3 — Summary of Significant Accounting Policies This note outlines the key accounting principles and policies used in preparing the condensed consolidated financial statements, including principles of consolidation, basis of presentation, use of estimates, revenue recognition, and treatment of various financial instruments and expenses Principles of Consolidation The financial statements consolidate Milestone Scientific Inc. and its wholly-owned (Wand Dental) and majority-owned (Milestone Medical) subsidiaries, eliminating all significant intra-entity transactions - The financial statements include Milestone Scientific and its wholly-owned subsidiary Wand Dental, Inc., and majority-owned subsidiary Milestone Medical, Inc.[25] Basis of Presentation The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations, and do not include all disclosures required for complete annual statements - Interim financial statements are prepared in accordance with GAAP and SEC rules for Form 10-Q, and do not include all information required for complete annual financial statements[26] Use of Estimates Management makes significant estimates for financial reporting, including allowances for doubtful accounts, inventory valuation, going concern assessments, stock compensation, and deferred tax asset valuation allowances - Significant estimates include allowance for doubtful accounts, inventory valuation, going concern considerations, stock compensation expense, and valuation allowances on deferred tax assets[27] Revenue Recognition Revenue from product sales, primarily dental instruments and handpieces, is recognized when control is transferred to the customer, typically upon shipment - Revenue is recognized when customers obtain control of promised goods or services, generally upon shipment[28][29] - The company launched an E-Commerce platform on January 3, 2023, for direct sales of STA Single Tooth Anesthesia Systems® and handpieces to U.S. dental offices[30] - An allowance of approximately $179,000 for product returns from a terminated major U.S. distributor was reversed as no returns were presented by March 31, 2023[32] Cash and Cash Equivalents Cash and cash equivalents decreased significantly from $8.7 million at December 31, 2022, to $3.7 million at June 30, 2023 Cash and Cash Equivalents | Metric | June 30, 2023 | December 31, 2022 | | :------------------------ | :-------------- | :---------------- | | Cash and cash equivalents | $3,701,453 | $8,715,279 | - Approximately $3.4 million (June 30, 2023) and $8.3 million (December 31, 2022) in cash, cash equivalents, and marketable securities exceeded FDIC insurance limits[35] Marketable Securities The company holds approximately $2.0 million in U.S. treasury securities as of June 30, 2023, with maturities within 3 to 6 months, measured at fair value - As of June 30, 2023, the Company held approximately $2.0 million in U.S. treasury securities with maturity dates within 3 and 6 months[37] - Marketable securities are measured at fair value, with unrealized gains/losses recorded in the statements of operations[36] Accounts Receivable Accounts receivable, net of allowance for doubtful accounts, increased from $693,717 at December 31, 2022, to $789,584 at June 30, 2023 Accounts Receivable, Net | Metric | June 30, 2023 | December 31, 2022 | | :------------------------ | :-------------- | :---------------- | | Accounts receivable, net | $789,584 | $693,717 | | Allowance for doubtful accounts | $27,000 | $10,000 | - E-commerce payments are settled within 2 business days, while distributor credit sales are due within 90 days or less[38][39] Inventories (Accounting Policy) Inventories are valued at the lower of cost (FIFO method) or net realizable value, with provisions for excess, slow-moving, defective, and obsolete items recorded quarterly - Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value[40] - A provision for excess, slow-moving, defective, and obsolete inventory is recorded based on sales expectations and technological obsolescence[40] Basic and Diluted Net Loss Per Common Share Basic and diluted net loss per common share are calculated based on net loss applicable to common stockholders and weighted average shares outstanding Weighted Average Shares Outstanding (Basic and Diluted) | Period | 2023 | 2022 | | :-------------------------------- | :------------ | :------------ | | Three months ended June 30 | 72,333,656 | 70,356,796 | | Six months ended June 30 | 72,048,223 | 70,585,590 | - Potentially dilutive outstanding stock options, unissued restricted stock awards, and warrants were excluded from diluted EPS calculations due to net losses, as their effect would be anti-dilutive[43] Stock-Based Compensation (Accounting Policy) Stock-based compensation for employees, non-employees, directors, and officers is recognized as an operating expense over the service period, based on grant-date fair values - Stock-based compensation is recognized as an operating expense over the service period, based on grant-date fair values, for all share-based payments[44] Recent Accounting Pronouncements The company adopted ASU 2019-10, which deferred the effective date of ASU 2016-13 (Measurement of Credit Losses on Financial Instruments), effective January 1, 2023 - The company adopted ASU 2019-10 (deferring ASU 2016-13 on credit losses) effective January 1, 2023[46] - The adoption of ASU 2019-10 did not have a material impact on the company's financial statements[46] NOTE 4 — Inventories Total inventories increased to $2.19 million as of June 30, 2023, from $1.79 million at December 31, 2022, primarily due to an increase in dental finished goods Inventories Breakdown | Category | June 30, 2023 | December 31, 2022 | | :------------------------ | :-------------- | :---------------- | | Dental finished goods | $1,833,864 | $1,315,263 | | Medical finished goods | $208,081 | $334,124 | | Component parts and other materials | $151,118 | $142,948 | | Total inventories | $2,193,063 | $1,792,335 | - An allowance of approximately $1.1 million (June 30, 2023) and $1.0 million (December 31, 2022) has been recorded for slow-moving medical finished goods due to slow adoption of epidural instruments and handpieces[48] NOTE 5 — Advances on Contracts Advances on contracts, primarily for future STA devices and epidural instruments/parts, remained stable at approximately $1.3 million as of June 30, 2023, and December 31, 2022 - Advances on contracts for STA devices, epidural instruments, and replacement parts were approximately $1.3 million as of June 30, 2023, and December 31, 2022[49] - These advances are classified as current based on the estimated annual usage of the underlying inventory[49] NOTE 6 — Stockholders' Equity This note details changes in stockholders' equity, including warrant activity, shares to be issued, stock option plans, and restricted stock awards Warrants The number of outstanding warrants significantly decreased from 4,268,221 at January 1, 2023, to 314,572 at June 30, 2023, primarily due to expirations Warrant Activity (Six Months Ended June 30, 2023) | Metric | Number of Warrant Shares | | :------------------------ | :----------------------- | | Outstanding at January 1, 2023 | 4,268,221 | | Expired or cancelled | (3,953,649) | | Outstanding at June 30, 2023 | 314,572 | - The weighted average exercise price for outstanding warrants at June 30, 2023, was $0.50, with a remaining life of 0.60 years[50] Shares to Be Issued Shares to be issued, including those deferred under employment agreements and for services rendered to non-employees, increased to 2,762,765 at June 30, 2023, from 2,440,673 at January 1, 2023 Shares to Be Issued Activity | Metric | June 30, 2023 | June 30, 2022 | | :------------------------ | :-------------- | :-------------- | | Shares-to-be-issued, outstanding January 1 | 2,440,673 | 2,066,343 | | Granted in current period | 322,092 | 108,148 | | Shares-to be issued outstanding June 30 | 2,762,765 | 2,027,153 | - As of June 30, 2023, 2,380,068 shares were deferred for issuance to the CEO and other employees upon employment termination, and 382,697 shares were to be issued to non-employees for services rendered[51][52] Stock Options Plans The 2020 Equity Compensation Plan allows for various awards, including options; employee stock options outstanding remained stable at 3,059,989, while non-employee options increased slightly - The 2020 Equity Compensation Plan authorizes up to 11,500,000 shares for awards and expires in June 2031[55] Employee Stock Option Activity (Six Months Ended June 30, 2023) | Metric | Number of Options | | :------------------------ | :---------------- | | Options outstanding January 1, 2023 | 3,059,989 | | Options outstanding June 30, 2023 | 3,059,989 | | Exercisable, June 30, 2023 | 1,481,651 | - Total employee stock-based compensation cost was approximately $457,000 for the six months ended June 30, 2023[56] Restricted Stock Awards Non-vested restricted stock awards increased to 513,107 shares at June 30, 2023, with new grants to Board members in June 2023 totaling 617,978 shares Restricted Stock Award Activity (Six Months Ended June 30, 2023) | Metric | Number of Shares | | :------------------------ | :--------------- | | Non-vested as January 1, 2023 | 435,293 | | Granted | 617,978 | | Vested | (540,164) | | Non-vested as June 30, 2023 | 513,107 | - 617,978 restricted stock awards were granted to Board members in June 2023 at $0.89 per share, vesting 25% on grant date and 25% quarterly thereafter[61] - The company recognized approximately $307,000 for restricted stock expenses related to Board members for the six months ended June 30, 2023[61] NOTE 7 — Income Taxes Milestone Scientific has established a 100% valuation allowance against all its deferred tax assets due to uncertainty regarding their future realization - A 100% valuation allowance has been established for all deferred tax assets due to uncertainty of future realization[62] - The utilization of net operating losses may be substantially limited by 'change of ownership provisions' under Section 382 of the Internal Revenue Code[62] NOTE 8 — Segment and Geographic Data The company operates in two reportable segments: Dental and Medical, with the Dental segment showing strong growth in net sales and operating income, while the Medical segment continued to incur operating losses Net Sales by Segment (Three Months Ended June 30) | Segment | 2023 | 2022 | Change (Absolute) | Change (%) | | :------------------------ | :------------ | :------------ | :---------------- | :--------- | | Dental | $2,912,166 | $1,609,768 | $1,302,398 | 80.91% | | Medical | $(2,200) | $38,600 | $(40,800) | -105.70% | | Total net sales | $2,909,966 | $1,648,368 | $1,261,598 | 76.54% | Operating Income (Loss) by Segment (Six Months Ended June 30) | Segment | 2023 | 2022 | Change (Absolute) | Change (%) | | :------------------------ | :------------ | :------------ | :---------------- | :--------- | | Dental | $1,240,884 | $517,262 | $723,622 | 139.89% | | Medical | $(1,685,832) | $(2,851,374) | $1,165,542 | -40.88% | | Corporate | $(3,175,278) | $(2,465,249) | $(710,029) | 28.80% | - For the three months ended June 30, 2023, domestic dental sales (instruments, handpieces, accessories) totaled $1,422,780, international (Rest of World) dental sales were $1,219,386, and China dental instrument sales were $270,000[65] - For the six months ended June 30, 2023, domestic dental sales totaled $2,809,903, international (Rest of World) dental sales were $2,423,661, and China dental instrument sales were $270,000[66] NOTE 9 — Concentrations The company relies on informal arrangements with third-party U.S. manufacturers for its STA devices and epidural instruments, posing a risk if these relationships are terminated - Milestone Scientific relies on informal arrangements with third-party U.S. manufacturers for STA devices and epidural instruments, without long-term contracts or minimum purchase commitments, posing a risk of supply interruption[67] - For the three months ended June 30, 2023, the E-Commerce platform accounted for 43% of net product sales, and one distributor accounted for 11%; for the six months ended June 30, 2023, E-Commerce accounted for 42% of net product sales[68] - As of June 30, 2023, three distributors accounted for 40%, 16%, and 11% of accounts receivable, respectively[69] NOTE 10 — Related Party Transactions The company has significant related party transactions, including purchases from United Systems, royalty fees and consulting fees paid to the Director of Clinical Affairs, and compensation agreements with Mr. Osser - Purchases from United Systems, a related party manufacturer, were approximately $1.3 million for the six months ended June 30, 2023[71] - Royalty fees to the Director of Clinical Affairs were approximately $267,000 for the six months ended June 30, 2023, with an additional $78,000 in consulting fees[74] - Compensation of $100,000 each was recorded for the Managing Director, China Operations (Mr. Osser) and U.S. Asian Consulting Group, LLC (Mr. Osser's company) for the six months ended June 30, 2023[76] NOTE 11 — Commitments The company has a purchase commitment of approximately $2.9 million for 3,000 STA instruments as of June 30, 2023, with $1.2 million already paid - As of June 30, 2023, the company had a purchase commitment of approximately $2.9 million for 3,000 STA instruments, with $1.2 million already paid as advances on contracts[77] Lease Commitments (Six Months Ended June 30, 2023) | Metric | Value | | :-------------------------------- | :---------- | | Cash paid for operating lease liabilities | $63,763 | | Cash paid for finance lease liabilities | $5,370 | | Weighted Average Remaining Lease Term (Finance leases) | 1.5 years | | Weighted Average Remaining Lease Term (Operating leases) | 3.75 years | | Weighted-average discount rate (Operating leases) | 9.20% | | Weighted-average discount rate (Finance leases) | 9.20% | 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 operational overview, detailed results of operations, and an assessment of liquidity and capital resources Overview Milestone Scientific is a biomedical technology company focused on computer-controlled injection technologies for medical and dental markets, aiming to establish its DPS Dynamic Pressure Sensing technology as the standard of care - Milestone Scientific aims to establish its DPS Dynamic Pressure Sensing technology platform as the standard-of-care in painless and precise drug delivery[85] - The company is transitioning from R&D to a commercially focused medical device company, expanding its global footprint for the CompuFlo Epidural and CathCheck System[85] - The CompuFlo Epidural System received a chronology-specific CPT Code in May 2022, effective January 1, 2023, to facilitate reimbursement for epidural procedures[89] - On February 27, 2023, the CompuFlo® Epidural System received 510(k) FDA clearance for use in the thoracic region of the spine, expanding its prior lumbar region approval[90] Results of Operations This section analyzes the consolidated results of operations, detailing changes in net sales, gross profit, operating expenses, and overall loss from operations for the three and six months ended June 30, 2023, compared to the prior year Three Months Ended June 30, 2023 vs. 2022 For the three months ended June 30, 2023, consolidated revenue increased by 76.5% to $2.9 million, driven by the new E-Commerce platform and international sales Key Financial Changes (Three Months Ended June 30) | Metric | 2023 | 2022 | Change (Absolute) | Change (%) | | :-------------------------------- | :------------ | :------------ | :---------------- | :--------- | | Total sales, net | $2,909,966 | $1,648,368 | $1,261,598 | 76.54% | | Dental sales | $2,912,166 | $1,609,768 | $1,302,398 | 80.91% | | Medical sales | $(2,200) | $38,600 | $(40,800) | -105.70% | | Total gross profit | $1,890,059 | $680,648 | $1,209,411 | 177.69% | | Selling, general and administrative expenses | $3,937,281 | $3,282,322 | $654,959 | 19.95% | | Research and development expenses | $213,647 | $266,560 | $(52,913) | -19.85% | | Loss from operations | $(2,277,550) | $(2,884,879) | $607,329 | -21.05% | - E-commerce revenue for the three months ended June 30, 2023, was approximately $1.2 million, replacing revenue from the previous U.S. distributor, Henry Schein[95] - International revenue increased by $588,000, including $270,000 from China, for the three months ended June 30, 2023[95] Six Months Ended June 30, 2023 vs. 2022 For the six months ended June 30, 2023, consolidated revenue increased by 26.6% to $5.5 million, primarily due to the E-Commerce platform's $2.2 million revenue Key Financial Changes (Six Months Ended June 30) | Metric | 2023 | 2022 | Change (Absolute) | Change (%) | | :-------------------------------- | :------------ | :------------ | :---------------- | :--------- | | Total sales, net | $5,507,564 | $4,349,270 | $1,158,294 | 26.63% | | Dental sales | $5,503,564 | $4,303,120 | $1,200,444 | 27.89% | | Medical sales | $4,000 | $46,150 | $(42,150) | -91.33% | | Total gross profit | $3,778,682 | $2,363,074 | $1,415,608 | 59.82% | | Selling, general and administrative expenses | $7,011,012 | $6,397,948 | $613,064 | 9.58% | | Research and development expenses | $353,994 | $731,027 | $(377,033) | -51.58% | | Loss from operations | $(3,620,226) | $(4,799,361) | $1,179,135 | -24.57% | - E-commerce revenue for the six months ended June 30, 2023, was approximately $2.2 million[100] - International revenue increased by $403,000, though China revenue decreased by $90,000, for the six months ended June 30, 2023[100] Liquidity and Capital Resources Milestone Scientific continues to experience operating losses and negative cash flows but believes it has sufficient cash and dental business support for the next twelve months, supplemented by $2.0 million in U.S. treasury securities - Milestone Scientific has incurred annual operating losses and negative cash flows from operating activities since inception[105] Liquidity Snapshot (June 30, 2023) | Metric | Amount | | :------------------------ | :----------- | | Cash and cash equivalents | $3.7 million | | Working capital | $7.4 million | | U.S. treasury securities | $2.0 million | - Net cash used in operating activities was approximately $3.0 million for the six months ended June 30, 2023, an improvement from $3.8 million in the prior year[105] - Management believes current cash, cash flow, and dental business support are sufficient to mitigate expected expenditures for the Epidural medical device commercialization and other operating/development programs for the next twelve months[105] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a 'smaller reporting company,' Milestone Scientific Inc. is not required to provide specific quantitative and qualitative disclosures about market risk - Milestone Scientific is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a 'smaller reporting company'[106] Item 4. Controls and Procedures The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2023, concluding they are effective - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2023[107] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[108] PART II—OTHER INFORMATION Part II covers other essential information, including risk factors, legal proceedings, and exhibits Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - No material changes to risk factors previously disclosed in the 2022 Annual Report on Form 10-K[109] Item 1B. Unresolved Staff Comments There are no unresolved staff comments - No unresolved staff comments[110] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the current report - This item is not applicable[111] Item 3. Defaults Upon Senior Securities This item is not applicable to the current report - This item is not applicable[112] Item 4. Mine Safety Disclosure This item is not applicable to the current report - This item is not applicable[113] Item 5. Other Information This item is not applicable to the current report - This item is not applicable[114] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and Inline XBRL documents - Exhibits include Rule 13a-14(a) and Section 1350 Certifications from the Chief Executive Officer and Chief Financial Officer[116] - Inline XBRL documents (Instance, Taxonomy Extension Schema, Calculation, Label, Presentation, Definition Linkbase) are filed as exhibits[116] Signatures This section contains the official signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report Signatures The report is duly signed on behalf of Milestone Scientific Inc. by its Chief Executive Officer, Arjan Haverhals, and Chief Financial Officer, Peter Milligan, as of August 14, 2023 - The report was signed by Arjan Haverhals, Chief Executive Officer, and Peter Milligan, Chief Financial Officer, on August 14, 2023[120]