Note 1-NOTE 1 — ORGANIZATION andAND BUSINESS

All references in this report to “Milestone“Milestone Scientific,” “us,” “our,” “we,” “the Company”the “Company” or “Milestone” refer to Milestone Scientific Inc., and its consolidated subsidiaries, Wand Dental, Inc., Milestone Advanced Cosmetic Devices, Inc., Milestone Medical, Inc. and Milestone Education LLC (all described below), unless the context otherwise indicates. Milestone Scientific is the owner of the following registered U.S. trademarks: CompuDent®; CompuMed®; CompuFlo®; DPS Dynamic Pressure Sensing Technology®technology®; Milestone Scientific ®; the Milestone logo ®; SafetyWand®; STA Single Tooth Anesthesia System®Device®; 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 instrument, through the use ofdevice, using The Wand®, a single use disposable handpiece. The instrumentdevice is marketed in dentistry under the trademark CompuDent®, and STA Single Tooth Anesthesia System®Device® and in medicine under the trademark CompuMed®. CompuDent® is suitable for all dental procedures that require local anesthetic. CompuMed® is suitable for many medical procedures regularly performed in Plastic Surgery, Hair Restoration Surgery, Podiatry, Colorectal Surgery, Dermatology, Orthopedicsplastic surgery, hair restoration surgery, podiatry, colorectal surgery, dermatology, orthopedics and a number ofmany other disciplines. The dental instrumentsdevices are sold in the United States, Canada and in 4753 other countries. To date there have been no medical instrumentsdevices sold in the United States and limited amounts sold internationally, although certain medical instrumentsdevices have obtained CE mark approval and can be marketed and sold in most European countries. In June 2017,

During 2016, Milestone Scientific received 510(k)filed for 510(k) marketing clearance fromwith the U.S. Food and Drug Administration (FDA) on the CompuFlo® Epidural Computer Controlled Anesthesia System.

During 2015, our common stock was listed on the NYSE MKT under the ticker symbol “MLSS”.

During 2016, Milestone Scientific filed for 510(k) marketing clearance with the FDA for both intra-articular and epidural injections with the CompuFlo®CompuFlo® Computer Controlled Anesthesia System.System (the “CompuFlo Epidural System”).  In June 2017, the FDA approved the CompuFlo® Epidural Computer Controlled Anesthesia System for epidural injections.  Milestone Scientific is in the process of introductory meetings with medical device distributors within the United States and foreign markets. Milestone Scientific’s immediate focus is on marketing its epidural instrumentdevice throughout the United States and Europe.

In December 2016, we received notification from the FDA that based upon the 510(k) application510(k)-application submitted for intra- articular injections, we did not adequately document that the device met the equivalency standard required for 510(k) clearance.510(k) clearances. Following consultation with the FDA Office of Device Evaluation, we intend to provide additional data, which could includefile a new Human Factor Validation study (HFV Study) in support of a new 510(k)510(k) application for the device. An HFV Study demonstrates the ease of use of a product.device in 2018.

NOTE 2- LIQUIDITY AND UNCERTAINTIES

In December 2016, we completed an underwritten public offeringaccordance with Accounting Standard Codification (“ASC”) 205-40, “Presentation of 2,000,000 shares of common stock and warrantsFinancial Statements – Going Concern”, the Company has evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to purchase up to 1,592,775 shares of common stock. The public offering price for each share and related warrant was $1.50. The gross proceeds from this offering were approximately $3,000,000, before deducting underwriting discounts and commissions and other offering expenses.

In January 2017, the underwriter exercised a portion of its over-allotment option and purchased an additional 123,700 shares of common stock at the public offering price of $1.499 per share. The gross proceeds were approximately $186,000 before deducting underwriting discounts and commissions and other offering expenses.

In June 2017, Milestone Scientific entered into an agreement for the sale of its interest in Milestone China (a forty (40%) percent interest) (the “Milestone China Shares”) to an unaffiliated United States domiciled purchaser and a 10-year option agreement to repurchase the Milestone China Shares. The purchase price for the Milestone China Shares was $1,400,000 of which $125,000 was paid in cash and $1,275,000 was paid by delivery of a non-interest bearing secured promissory note. The note is payable in quarterly installments of $125,000 and is secured by the Milestone China Shares until full repayment.  In addition, the purchaser is precluded from selling all or substantially all of its assets prior to repayment of the note. The 10-year option agreement provides Milestone Scientific an option to repurchase the Milestone China Shares at $1,400,000 within the first two years and at fair market value (as defined in such agreement) for the remainder of the 10-year term. The transaction has been accounted forcontinue as a secured financing and Milestone Scientific will continue to account for its relationship with Milestone China under the equity method of accounting. A note receivable is presented on the Company’s balance sheet, along with a deferral from financing transaction ($1,400,000). The carrying value of the forty (40%) percent investment at the transaction date was zero (see Note 5).

On July 13, 2017, Milestone Scientific consummated a previously disclosed Asset Purchase Agreement (the “Agreement”) with APAD Octrooi B.V. and APAD B.V. (each, a “Seller” and collectively, the “Sellers”) pursuant to which Milestone Scientific acquired certain patent rights and other intellectual property rights related to the Sellers’ computer controlled injection instrument (the “Purchased Assets”) which has been accounted for as an asset acquisition. On the closing date, Milestone Scientific issued to the Sellers an aggregate of 1,646,358 shares of its common stock, valued at $2,486,000 which shares are subject to certain post-closing upward or downward adjustments not to exceed twenty-five percent of the initial shares as of the purchase date or 250,000 Euros, as defined in the Agreement. As of September 30, 2017, Milestone Scientific has recorded a $167,000 liability relating to the estimated additional shares that would have to be issued according this provision in the Agreement. Milestone Scientific paid approximately $153,000 in legal fees on behalf of the Seller as stipulated based on the terms of the Agreement. The patents and other intellectual property purchased in the amount of approximately $2,639,000 have been capitalized and will amortized over their fivegoing concern within one year estimated useful life and tested for impairment as a finite lived intangible asset.

In July 2017, Milestone Scientific's Compensation Committee approved the issuance of 400,000 stock options to Gian Domenico Trombetta, CEO of Wand Dental, a Director of Milestone Scientific and a director of Innovest S.p.A., an Italian investor (250,000 options at an exercise price of $2.55 per share were issued on July 7, 2017 and 150,000 options having an exercise price at the higher of $2.55 or the market price of the stock onafter the date ofthat the 2018 Annual Stockholder meeting, subject to approval of a new or amended equity incentive plan at such meeting.)

consolidated financial statements are issued. Milestone Scientific has incurred operating losses and negative cash flows from operating activities in virtuallyvirtually each year since its inception. Milestone Scientific is actively pursuing the generation of revenue, positive operating income and net income. The capital raised in December 2016 and January 2017 provided Milestone Scientific with working capital to continue to develop its medical instrumentsdevices and obtain regulatory approval for one of its medical instruments ( the June, 2017 FDA approval of the epidural instrument)CompuFlo® Epidural Computer Controlled Anesthesia System (the “CompuFlo Epidural System”), as well as to aggressively market its dental instruments.devices. 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 instrumentsdevices and disposables business in the United States (following June 2017 FDA approval of its CompuFlo® Computer Controlled Anesthesia System ) Epidural System) and worldwide, and a reductionsreduction in operating expenses.

Management believes that Milestone Scientific will have sufficient cash reserves to meet its anticipated obligations over the next twelve month period following months from the filing date of this quarterly report. However, Milestone Scientific will likely need to raise additional capital prior to the expected generation of sustainable positive cash flow from operating activities and may also need to raise additional capital to effectively launch its approved medical instrumentEpidural Device and eventually generate positive cash flow from the anticipated medical business.

The Company is subject to several risks like those of development stage companies, including dependence on key individuals and products, the difficulties inherent in the development of a commercial market, the potential need to obtain additional capital necessary to fund the development of its products, and competition from larger companies and other medical device companies that develop similar or substitute products. The Company's sales performance, selling and marketing expenditures to develop sales performance, as well as the status of each of its new product development programs and the resulting operating income (loss), will significantly impact its cash requirements.  

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE - 2 SUMMARY OF ACCOUNTING POLICIES

1. Basis Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally acceptedaccepted in the United States ("GAAP") and include the accounts of Milestone Scientific and its wholly owned and majority owned subsidiaries, including, Wand Dental (wholly owned), Milestone Advanced Cosmetic (majority owned) and Milestone Medical (majority owned). Milestone Education is a variable interest entity of which Milestone Scientific is the primary beneficiary and is consolidated into Milestone Scientific's financial statements. All significant, intra-entity transactions and balances have been eliminated in the consolidation.   

2.  Basis of Presentation

The unaudited condensed consolidated financial statements of Milestone Scientific have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information with the instructions for Form 10Q and Article 810 of Regulation S-X.S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring entries) necessary to fairly present such interim results. Interim results are not necessarily indicative of the results of operations which may be expected for a full year or any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2016, 2017, included in Milestone Scientific's Annual Report on Form 10-K.10-K.

3.  Reclassifications

Certain reclassifications have been made to the 20162017 financial statements to conform to the condensed consolidated 20172018 financial statement presentation. These reclassifications had no effect on net loss or cash flows as previously reported.

4. Revenue Recognition

Under ASC 606, 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 for arrangements within the scope of ASC 606, the Company performs the following five steps:

(i)         identification of the promised goods or services in the contract;

(ii)        determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii)       measurement of the transaction price, including the constraint on variable consideration;

(iv)       allocation of the transaction price to the performance obligations based on estimated selling prices; and

(v)        recognition of revenue when (or as) the Company satisfies each performance obligation. A performance obligation is a promise in a contract to transfer a distinct good

  or service to the customer and is the unit of account in ASC 606.

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

Revenue from product sales are recognized upon transfer of control of a product to a customer, generally upon date of shipment. For certain arrangements where the shipping terms are FOB destination, revenue is recognized upon delivery. The Company has no obligation on product sales for any installation, set-up or maintenance, these being the responsibility of the buyer. Milestone Scientific's only obligation after sale is the normal commercial warranty against manufacturing defects if the alleged defective unit is returned within the warranty period.

Sales Returns

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

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

Milestone Scientific isbecame the primary beneficiary of Milestone Education as of January 2016. 2017. Accordingly, the assets and liabilities of Milestone Education are included in the accompanying condensed consolidated financial statements.

Because Milestone Scientific had an increasing variable interest in Milestone China, it further considered the guidance in Accounting Standard Codification ("ASC") ASC 810, “Consolidation” as it relates to determining whether Milestone China is a VIE and, if so, identifying the primary beneficiary. As Milestone China’s equity at risk and voting rights were not proportional to their economic interest, Milestone China was determined to be a VIE. Milestone Scientific would be considered the primary beneficiary of the VIE if it has both of the following characteristics:

●   Power Criterion: The power to direct the activities that most significantly impact the entity’s economic performance; and

●

Power Criterion: The power to direct the activities that most significantly impact the entity’s economic performance; and

●   Losses/Benefits Criterion: The obligation to absorb losses that could potentially be significant or the right to receive benefits that could potentially be significant to the VIE.

Milestone management does not have the ability to control the activities that most significantly impact Milestone China's economics and, therefore, the power criterion has not been met. ManagementManagement placed the most weight on the relationship and significance of activities of Milestone China to the majority shareholder/CEO of Milestone China.  As majority shareholder, majority holder of voting rights, and the active CEO, the 53% investor has the power to direct the activities that most significantly impact the economic performance of Milestone China. Management has concluded that Milestone Scientific is not the primary beneficiary under ASC 810. Accordingly, Milestone China has not been consolidated into the financial statements of Milestone Scientific and continues to be accounted for under the equity method.method

5.6. Cash and Cash Equivalents

Milestone Scientific considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

6.7. Accounts Receivable

Milestone Scientific sells a significant amount of its product on credit terms to its major distributors. Milestone Scientific estimates losses from the inability of its customers to make payments on amounts billed. A majorityMost of credit sales are due within ninetywithin 90 days from invoicing. There have not been any significant credit losses incurred to date. As of March 31, 2018 and December 31, 2017, accounts receivable was recorded, net of allowance for doubtful accounts of $10,000.

7. 8. Note Receivable

Milestone Scientific values note receivable at historic cost less amount paid against principle. Milestone Scientific estimates losses on the note-based payments and credit quality of the debtor. 

9.Product Return and Warranty

Milestone Scientific generally does not accept non-defective returns from its customers. Product returns under warranty are accepted, evaluated and repaired or replaced in accordance with the Warranty Policy.Company’s warranty policy. Returns not within the Warranty Policywarranty policy are evaluatedevaluated and the customer is charged for the repair.

8.10. Inventories

Inventories principally consist of finished goods and component parts stated at the lower of cost (first-in, first-out(first-in, first-out method) or market.net realizable value. Inventory quantities on hand are reviewed on a quarterly basis and a provision for excess, slow moving, and obsolete inventory is recorded if required based on past and expected future sales, potential technological obsolescence and product expiration requirements. As of March 31, 2018, and December 31, 2017, inventory was recorded net of allowance for slow moving inventory of approximately $220,000.

9.11. Equity Method Investments

Investments in whichwhich Milestone Scientific has the ability tocan exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in the long termnoncurrent assets on the condensed consolidated balance sheets.Condensed Consolidated Balance Sheets. Under this method of accounting, Milestone Scientific's share of the net earnings or losses of the investee is presented below the income tax line on the condensed consolidated statementsCondensed Consolidated Statements of operations.

Operations. Milestone Scientific evaluates its equity method investments wheneverwhenever events or changes in circumstance indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

10.12. 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 fivetwo to seven years. years. The costs of maintenance and repairs are charged to operations as incurred.

11. 13.  Intangible Assets -– Patents and Developed Technology

Patents are recorded at cost to prepare and file the applicable documents with the US Patent Office, or internationally with the applicable governmentalgovernmental 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 will be amortized at the estimated average useful life of the patent. These patents and developed technology are recorded at the acquisition cost and included legal fees.cost. 

12.Patent defense costs, to the extent applicable, are expensed as incurred.  Patent applications filed, and patents obtained in foreign countries are subject to the laws and procedures that differ from those in the United States. Patent protection in foreign countries may be different from patent protection under United States laws and may not be favorable to Milestone Scientific. Milestone Scientific also attempts to protect the proprietary information using confidentiality agreements and by limiting access to its facilities. There can be no assurance that the program of patents, confidentiality agreements and restricted access to the facilities will be sufficient to protect the proprietary technology.              

14. Impairment of Long-Lived Assets

As of March 31, 2018, Milestone Scientific reviewshas reviewed long-lived assets for impairment whenever events or circumstances (i.e. a triggering event) indicate that the carrying amounts may not be recoverable.any impairments. The carrying value of the assets is evaluated in relation to the operating performance and future undiscounted cash flows of the underlying assets.assets when an impairment indicator or triggering event occurs. Milestone Scientific adjusts the net book value of an underlying asset if its fair value is determined to be less than its net book value. There have been no impairment indicators or triggering events and therefore, there were no impairment reviews have been performed in the period ending September 30,impairments as of March 31, 2018 and December 31, 2017.

13. Revenue Recognition

Revenue from product sales is recognized, net of discounts and allowances to domestic distributors, on the date of shipment for substantially all shipments, since the shipment terms are FOB warehouse. Milestone Scientific recognizes revenue on date of arrival of the goods at the customer's location, where shipments are FOB destination. In all cases the price to the buyer is fixed and the collectability is reasonably assured. Further, Milestone Scientific has no obligation on these sales for any post 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. Instrument and hand pieces are not bundled but rather sold separately and, as such, there are no multiple element determinations in connection with the revenue recognition.

14.15. Shipping and Handling Costs

Milestone Scientific includes shippingShipping and handling costs, in cost of goods sold. These costsif any, are paid by or billed to customers at the time of shipment for domestic shipments. InternationalDomestic and international shipments are FOB warehouse,warehouse; therefore, no costs are incurred by Milestone Scientific.  

15.16. Research and Development

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

16.17. Income Taxes

Milestone Scientific accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed for temporarytemporary 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.

17.18. Basic and diluted net loss per common share

Milestone Scientific presents “basic” earnings (loss) per common share applicable to common stockholders and, if applicable, “diluted” earnings (loss) per common share applicable to common stockholders pursuant to the provisions of ASC 260, “Earnings per Share”. Basic earnings (loss) per common share is calculated by dividing net income or loss applicable to common stockholders by the weighted average number of common shares outstanding and to be issued during each period. The calculation of diluted earnings per common share is like that of basic earnings per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of stock options, warrants, and the conversion of debt were issued during the period.

Since Milestone Scientific had net losses for 2018 and 2017, the assumed effects of the exercise of potentially dilutive outstanding stock options and warrants were not included in the calculation as their effect would have been anti-dilutive. Such outstanding options and warrants totaled 3,510,335 and 3,710,335 at March 31, 2018 and December 31, 2017, respectively.

19. Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to makemake estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to the allowance for doubtful accounts, inventory valuation, and cash flow assumptions regarding evaluations for impairment of long-lived assets and going concern considerations, and valuation allowances on deferred tax assets. Actual results could differ from those estimates.

18.20. Fair Value of Financial Instruments

Fair Value Measurements: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction betweenbetween market participants in the principal market at the measurement date (exit price). We are required to classify fair value measurements in one of the following categories:

●         Level 1 inputs which are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability tocan access at the measurement date.

●         Level 2 inputs which are defined as inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.

●         Level 3 inputs are defined as unobservable inputs for the assets or liabilities.

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 a particularan input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

19. Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts with customers. In August 2015, the FASB issued guidance approving a one-year deferral, making the standard effective for reporting periods beginning after December 15, 2017. The FASB continues to release guidance clarifying certain aspects of the revenue guidance. We do not believe that this new accounting pronouncement will have a material impact on our financial statements.

   In November 2015, the FASB issued guidance simplifying the balance sheet classification of deferred taxes. The new guidance requires that all deferred taxes be presented as noncurrent, rather than separated into current and noncurrent amounts. The guidance is effective for reporting periods beginning after December 15, 2016 and early adoption is permitted. In addition, the adoption of guidance can be applied either prospectively or retrospectively to all periods presented. The Company has adopted this pronouncement as of January 1, 2017, and applied retrospectively, for its provision for income taxes disclosure. The adoption did not have an impact on the presentation of the balance sheet, as the Company assigns a full valuation allowance to its net deferred tax asset.

In February 2016, the FASB issued a new standard Accounting Standards Update ("ASU ") No.2016-02, "Leases"(Topic 842). The new standard is intended to increase transparency and comparability among organizations to recognize lease assets and liabilities on the balance sheet and disclose key information about leasing arrangements. It will be effective for fiscal years beginning after December 15, 2018. Milestone Scientific is in the process of determining what impact, the adoption of this ASU will have on its financial position, results of operations and cash flows.

In March 2016, the FASB issued a new standard ASU No.2016-07, “Investments - Equity Method and Joint Ventures” (Topic 323): The new standard is intended to eliminate the requirement that when an investment qualifies for the use of the equity method as a result of an in increase in the level of ownership or degree of influence, results of operations and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect all of the previous periods that the investment was held. It will be effective for all entities for fiscal years and interim periods, beginning after December 15, 2016. The adoption of this standard did not have a material impact on our financial statements.

In March 2016, the FASB issued a new standard ASU No.2016-07, “Investments - Equity Method and Joint Ventures” (Topic 323): The new standard is intended to eliminate the requirement that when an investment qualifies for the use of the equity method as a result of an in increase in the level of ownership or degree of influence, results of operations and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect all of the previous periods that the investment was held. It will be effective for all entities for fiscal years and interim periods, beginning after December 15, 2016. The adoption of this standard did not have a material impact on our financial statements.

In June 2016, the FASB issued a new standard ASU No.2016-13, “Financial Instruments – Credit Losses” (Topic 326).: The new standard is intended to replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. It will be effective for all entities for fiscal years and interim periods, beginning after December 15, 2018. Milestone Scientific is in the process of determining what impact, if any, the adoption of this ASU will have on its financial position, results of operations and cash flows.

 In August 2016, the FASB issued a new standard ASU No.2016-15, "Statement Cash Flows “Classification of Certain Cash Receipts and Cash Disbursements" Topic 230). The new standard provides guidance as to the conformity of presentation of certain cash receipts and disbursements. It will be effective for all entities for fiscal years and interim periods, beginning after December 15, 2017. Milestone Scientific is in the process of determining what impact, if any, the adoption of this ASU will have on its presentation within the statement of cash flows.

In October 2016, the FASB issued a new standard ASU No.2016-17, "Consolidation Interests Held through Related Parties That Are under Common Control"(Topic 810). The new standard provides guidance as to consideration of consolidation requirements of a primary beneficiary and variable interest entity that are part of related party group under common control. It will be effective for fiscal years and interim periods, beginning after December 15, 2016. Milestone Scientific has adopted the standard, effective January 1, 2017, which did not have an impact on its financial reporting.

In November 2016, the FASB issued a new standard ASU No.2016-18, “Statement of Cash Flows – Restricted Cash” (Topic 230). The new standard provides guidance as to address the diversity of treatment of restricted cash on the statement of cash flows. It will be effective for all entities for fiscal years and interim periods, beginning after December 15, 2017 and

interim periods therein. Milestone Scientific does not expect the adoption of this ASU to have a material effect on its presentation within the statement of cash flows.

In January 2017, the FASB issued a new standard ASU No.2017-01, “Business Combinations” (Topic 805). The new standard provides guidance to clarify the definition of a ‘business’, and assist entities in evaluation whether a transaction should be accounted for as an acquisition/disposal of assets or a business. It will be effective for public entities for fiscal years and interim periods, beginning after December 15, 2017, with limited early application. Milestone Scientific is in the process of determining what impact, if any, the adoption of this ASU will have on its presentation within the statement of cash flows.

In May 2017, the FASB issued a new standard ASU No.2017-09, “Compensation – Stock Compensation” (Topic 718). The new standard provides guidance and clarity for modification to equity based compensation programs. It will be effective for all entities for fiscal years and interim periods, beginning after December 15, 2017. Milestone Scientific is in the process of determining what impact, if any, the adoption of this ASU will have on its presentation within the statement of cash flows.

NOTE - 3 21. Stock-Based CompensationBasic and Diluted Net INCOME (Loss) Per Common Share

Milestone Scientific presents "basic" earnings (loss) per common share applicableaccounts for stock-based compensation under ASC 718, “Compensation – Stock Compensation”. ASC 718 requires all share-based payments to common stockholders and, if applicable, "diluted" earnings (loss) per common share applicable to common stockholders pursuant to the provisionsemployees, including grants of Statement of Financial Accounting Standards ASC Topic 260. Basic earnings (loss) per common share is calculated by dividing net income or loss applicable to common stockholders by the weighted average number of common shares outstanding andemployee stock options, to be issued during each period. The calculation of diluted earnings per common share is similar to 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, suchrecognized as those issuable upon the exercise of stock options, warrants, and the conversion of debt were issued during the period.

Since Milestone Scientific had net losses for three months and nine months ended September 30, 2017 and 2016, the assumed effects of the exercise of potentially dilutive outstanding stock options and warrants were not included in the calculation as their effect would have been anti-dilutive. Such outstanding options and warrants totaled 4,629,557 and 1,885,010 at September 30, 2017 and 2016, respectively.

NOTE - 4 CONSOLIDATION OF VARIABLE INTEREST ENTITY

Milestone Education is a 50% owned subsidiary of Milestone Scientific which began operations in 2013 to provide training and education to dentists throughout the world. Milestone Scientific accounted for its investment in Milestone Education using the equity method of accounting through December 31, 2015. Approximately 81% of the revenue earned by Milestone Education is from services performed for Milestone Scientific as of September 30, 2017. As a result of this dependency and relationship, we determined that we had the power to direct the activities that most significantly impact Milestone Education's economic performance, and therefore is consolidated in our financial statements. 

NOTE - 5 INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES

Advance Ocular Science SA

Advanced Ocular Sciences SA ("Advanced Ocular") is a shell company attempting to develop an instrument to deliver injections into the eyes. As of September 30, 2017, Milestone Scientific owns 25% of this entity. During 2015, Milestone Scientific advanced $78,798 for marketing and strategy planning to Advanced Ocular and it, or its organizers, were obligated to repay this advance if a public offering of Advanced Ocular equity was approved and funded in Poland during 2016. However, a public offering has yet to be completed in Poland. As a result, Milestone Scientific wrote-off the $78,798 advanced to Advanced Ocular as of December 31, 2016. Advance Ocular was not included in the condensed consolidated financial statements at September 30, 2017 as no further investment has been made by Milestone Scientific.

Milestone China Ltd.

In June 2014, Milestone Scientific invested $1 million in Milestone China Ltd. (“Milestone China”) by contributing 772 STA Instruments to Milestone China for a 40% ownership interest. Milestone Scientific recorded this investment under the equity method of accounting. Milestone Scientific recorded a loss on its investment in Milestone China of $0 and $164,837, as of September 30, 2017 and 2016, respectively. Milestone Scientific's investment in Milestone China was $0 as of September 30, 2017 and December 31, 2016, respectively. Milestone Scientific incurred cumulative losses on its investment in Milestone China of $2,078,484 and $1,124,350 as of September 30, 2017 and December 31, 2016, respectively, which have been suspended.

  In June 2017, Milestone Scientific entered into an agreement for the sale of the Milestone China Shares to an unaffiliated United States domiciled purchaser and a 10-year option agreement to repurchase the Milestone China Shares. The purchase price for the Milestone China Shares was $1,400,000 of which $125,000 was paid in cash and $1,275,000 was paid by delivery of a non-interest bearing secured promissory note. The note is payable in quarterly installments of $125,000 until paid in full and is secured by the Milestone China Shares until full repayment.  In addition, pursuant to such note, the purchaser is precluded from selling all or substantially all of its assets prior to repayment of the note. The 10-year option agreement provides Milestone Scientific an option to repurchase the 40% equity interest at $1,400,000 within the first two years and at fair value (as defined in such agreement) for the remainder of the 10-year term. The transaction has been accounted for as a secured financing and Milestone Scientific will continue to account for its relationship with Milestone China under the equity method of accounting. A note receivable is presented on the Balance Sheet, along with a deferral from financing transaction ($1,400,000). The carrying value of the forty (40%) percent investment at the transaction date was zero.

Milestone Scientific had $356,400 and $1,714,600 of related party sales of handpieces and instruments to Milestone China and Milestone China’s agent during the three and nine months ended September 30, 2017 respectively. Milestone Scientific had $1,977,862 and $3,203,466 of related party sales of handpieces and instruments to Milestone China during the three and nine months ended September 30, 2016, respectively. As of September 30, 2017 and December 31, 2016, Milestone Scientific recorded deferred revenues and deferred costs associated with sales to Milestone China of $712,800 and $362,718, and $1,001,800 and $620,041, respectively.  As of September 30, 2017 and December 31, 2016, Milestone China’s agent owed $712,800 and $2,714,600, respectively, to Milestone Scientific which is included in related party accounts receivable on the condensed consolidated balance sheets. 

Milestone Scientific defers the total revenue and costs of goods sold when instruments and handpieces are shipped to Milestone China and Milestone China’s agent due to market conditions and Milestone China liquidity concerns. Due to timing differences of when the inventory sold to Milestone China is actually recognized and when Milestone China sells the acquired inventory to third parties, an elimination of the intra-entity profit is required as of the balance sheet date. In accordance with ASC 323 Equity Method and Joint Ventures, Milestone Scientific has deferred 40% of the gross profit associated with recognized revenue from Milestone China that has not been sold to third parties. At September 30, 2017 and December 31, 2016, the deferred profit was $659,931 and $630,990, respectively, which is included in the condensed consolidated balance sheets. For the nine months ended September 30, 2017 and 2016, the loss on equity investment was $28,941 and $554,766, respectively, which is included in the condensed consolidated statements of operation. For the three months ended September 30, 2017 and 2016, the loss on equity investment was $0 and $253,451, respectively, which is included in the condensed consolidated statements of operation.

The following table includes summarized financial information (unaudited) of Milestone China:

NOTE – 6 Stock Option Plans

Milestone Scientific recognizes compensation expense on a straight line basis over the requisite service period and inas an operating expense, based on the case of performance based options over the period of the expected performance. For the three and nine months ended September 30, 2017 Milestone Scientific recognized $299,175 and $543,290 of total employee stock based compensation cost, respectively. For the three and nine months ended September 30, 2016, Milestone Scientific recognized $81,678 and $107,205 of total employee stock based compensation cost, respectively. As of September 30, 2017 and 2016, there was $1,389,525 and $580,331 of total unrecognized compensation cost related to nonvested options, respectively, which Milestone Scientific expects to recognize these cost over a weighted average period of 2.5 years and 2.49 years as of September 30, 2017 and 2016, respectively.grant-date fair values.

A summary of option activity for employees under the plans and changes during the nine month ended September 30, 2017, is presented below:

A summary of option activity for non-employees under the plans As of September 30, 2017 and changes during the six month ended is

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.model. In accordance with the provisions of FASB ASC 505, Milestone Scientific re-measureswill re-measure the value of the grant at each presentation date unless there is a significant disincentive for non-performance or until performance has been.been rendered. For the three months March 31, 2018 and nine months ended September 30, 2017, Milestone Scientific recognized incomeapproximately $4,000 of $6,067expense, and $12,324, respectively17,100 of income related to non-employee options. For the three and nine months ended September 30, 2016, Milestone Scientific recognized expense of $2,807 and $8,421 respectively related to non-employee options.options, respectively.

NOTE – 7 CONCENTRATION OF CREDIT RISK22. Recent Accounting Pronouncements

Milestone Scientific's consolidated financial instruments that are exposed to concentrations of credit risk consist primarily of cash, trade accounts receivable, and advances on contracts. Milestone Scientific places its cash and cash equivalentsIn May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with large financial institutions. At times, such investments may beCustomers (Topic 606)” (ASC 606). The standard, including subsequently issued amendments, replaces most existing revenue recognition guidance in excessU.S. GAAP. The key focus of the Federal Deposit Insurance Corporation insurance limit. Milestone Scientific has not experienced any lossesnew standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in such accounts and believes it is not exposedan amount that reflects the consideration to any significant credit risks. Financial instruments which potentially subject Milestone Scientificthe entity expects to credit risk consist principallybe entitled in exchange for those goods or services. We adopted this new standard as of trade accounts receivable, as Milestone Scientific does not require collateral or other security to support customer receivables, and advances on contracts. Milestone Scientific closely monitorsJanuary 1, 2018 by using the extension of credit to its customers while maintaining allowances, if necessary, for potential credit losses. On a periodic basis, Milestone Scientific evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions.modified-retrospective method.

In connection with the adoption, we performed a review of our existing revenue arrangements as of January 1, 2018 following the five-step model outlined in ASC 606.

Based on our analysis, there were no changes identified that impacted the amount or timing of revenues recognized under the new guidance as compared to the previous guidance. Additionally, our analysis indicated that there were no changes to how costs to obtain and fulfill our customer contracts would be recognized under the new guidance as compared to the previous guidance.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. The Company will adopt this standard on January 1, 2019. We are currently evaluating the impact of adopting this guidance on our consolidated balance sheets, results of operations and financial condition.

NOTE – 8 ADVANCES ON CONTRACTSIn August 2016, the FASB issued ASU No. 2016-15, "Statement Cash Flows “Classification of Certain Cash Receipts and Cash Payments" (Topic 230). The new standard provides guidance as to the conformity of presentation of certain cash receipts and disbursements. The Company adopted this standard during the quarter ended March 31, 2018 and there was no material impact on the Company’s consolidated statements of cash flows.  

In May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation” (Topic 718). The advances on contracts represent funding of future STA inventory purchasesnew standard provides guidance and Epidural replacements parts.clarity for modification to equity-based compensation programs. The balance ofCompany adopted this standard during the advances As of September 30, 2017quarter ended March 31, 2018 and December 31, 2016 is $992,242 and $700,900, respectively. The advance is classified as current basedthere was no material impact on the estimated annual usage of the underlying inventory.   

NOTE – 9 INCOME TAXES

Due to Milestone Scientific's history of operating losses, a full valuation allowances has been provided for all of Milestone Scientific's deferred tax assets At September 30, 2017 and December 31, 2016, no recognition was given to the utilization of the remaining net operating loss carryforwards in each of these periods.

The utilization of Milestone Scientific's net operating losses may be subject to a substantial limitation due to the "change of ownership provisions" under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carry forwards before their utilization. Milestone Scientific has established a 100% valuation allowance for all of its deferred tax assets due to uncertainty as to their future realization.

As of September 30, 2017 and December 31, 2016, state tax liability was approximately $18,339 and $63,000, respectively. Such expense was recognized in the accompanying condensedCompany’s consolidated financial statements.

NOTE In February 2018, the FASB issued ASU No. 2018-02, “Income Statement – 10 SIGNIFICANT CONCENTRATIONS & GEOGRAPHICAL INFORMATIONReporting Comprehensive Income (Topic 220)”, which amends the previous guidance to allow for certain tax effects “stranded” in accumulated other comprehensive income, which are impacted by the Tax Cuts and Jobs Act (the “Act”), to be reclassified from accumulated other comprehensive income into retained earnings. This amendment pertains only to those items impacted by the new tax law and will not apply to any future tax effects stranded in accumulated other comprehensive income. This standard is effective for fiscal years beginning after December 15, 2018 and allows for early adoption. The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s consolidated balance sheet.

Milestone Scientific’s consolidated dental sales by product and by geographical region are as follows:  Revenue from the medical segment is not material as of September 2017.

Milestone Scientific has informal arrangements with a third party manufacturer of the STA, CompuDent® and CompuMed® instruments, pursuant to which they manufacture these products under specific purchase orders but without any long-term contract or minimum purchase commitment. In March 2016, Milestone Scientific entered into a purchase commitment for delivery of 3,000 instruments, as of September 30, 2017 all instruments have been received. In January 2017, Milestone Scientific entered into a purchase commitment for the delivery of 2,000 instruments beginning in the 4^th quarter

NOTE 5 — INVENTORIES

Inventories at March 31, 2018 and December 31, 2017 consist of the following:

As of March 31, 2018, and December 31, 2017, inventory was recorded net of allowance for slow moving inventory of approximately $220,000.

NOTE 6 — ADVANCES ON CONTRACTS

The advances on contracts represent funding of future STA inventory purchases and Epidural replacements parts. The balance of the advances as of March 31, 2018 and December 31, 2017 was $984,408 and $697,192 respectively. The advance is classified as current based on the estimated annual usage of the underlying inventory.    

NOTE 7 – CONSOLIDATION OF VARIABLE INTEREST ENTITY

Milestone Education is a 50% owned subsidiary of Milestone Scientific which began operations in 2013 to provide training and education to dentists throughout the world. As of March 31, 2018, and 2017, approximately 72% and 82% of the revenue earned by Milestone Education is from services performed for Milestone Scientific, respectively. Because of this dependency and relationship, we determined that we had the power to direct the activities that most significantly impact Milestone Education's economic performance, and therefore Milestone Education is consolidated in our financial statements. 

 NOTE 8 – INVESTMENT IN UNCONSOLIDATED AFFILIATE

Milestone China Ltd.

In June 2014, Milestone Scientific invested $1 million in Milestone China Ltd. (“Milestone China”) by contributing 772 STA Instruments to Milestone China for a 40% ownership interest. Milestone Scientific recorded this investment under the equity method of accounting. For the three months ended March 31, 2018, and 2017, Milestone Scientific recorded a loss on its investment in Milestone China of $0 and $44,401, respectively, inclusive of the intra-entity deferral of profit. As of  March 31, 2018 and December 31, 2017, Milestone Scientific's investment in Milestone China was $0. As of March 31, 2018, and December 31, 2017, Milestone Scientific’s share of cumulative losses of Milestone china were $3,524,617 and $3,147,470, respectively, which have been suspended.

As of March 2, 2018, the Note Receivable identified on the Balance Sheet was in default. If Milestone Scientific exercises its rights as a secured party it may be obligated to return to the purchaser up to the $250,000 received for the Milestone China Shares as surplus. At March 31, 2018, Milestone Scientific did not receive a response from the purchaser of the Milestone China Shares and did not recorded any financial benefit from the sale of Milestone China Shares to date. Refer to Note 4 for subsequent actions.

Milestone Scientific had no related party sales of handpieces and devices to Milestone China and Milestone China’s agent for three months ended March 31, 2018. Milestone Scientific had $1,001,800 of related party sales of handpieces and devices to Milestone China for the three months ended March 31, 2017. Milestone Scientific defers the total revenue and costs of goods sold when devices and handpieces are shipped to Milestone China and Milestone China’s agent due to market conditions and Milestone China liquidity concerns until a payment is received.

Due to timing differences of when the inventory sold to Milestone China is recognized and when Milestone China sells the acquired inventory to third parties, an elimination of the intra-entity profit is required as of the balance sheet date. In accordance with ASC 323, “Investments – Equity Method and Joint Ventures”, Milestone Scientific has deferred 40% of the gross profit associated with recognized revenue from Milestone China that has not been sold to third parties. At March 31, 2018 and December 31, 2017, the deferred profit was $714,717 and $751,500, respectively, which is included in deferred profit, related party in the, condensed consolidated balance sheets.

The salefollowing table includes summarized financial information (unaudited) of Milestone China:

 NOTE 9 — PATENTS

Patents at March 31, 2018 and December 31, 2017 are comprised of the Milestone China Shares allowsfollowing:

Patents are amortized utilizing the straight-line method over estimated useful lives ranging from 3 to 20 years, with a weighted average amortization period of approximately 5 years.

On July 13, 2017, Milestone Scientific consummated a Asset Purchase Agreement (the “Agreement”) with APAD Octrooi B.V. and APAD B.V. (each, a “Seller” and collectively, the “Sellers”) pursuant to continuewhich Milestone Scientific acquired certain patent rights and other intellectual property rights related to expandthe Sellers’ computer-controlled injection instrument (the “Purchased Assets”) and has been accounted for as an asset acquisition. On the closing date, Milestone Scientific issued to the Sellers an aggregate of 1,646,358 shares of its common stock, valued at approximately $2,486,000 for the Purchased Assets which shares are subject to certain post-closing upward or downward adjustments not to exceed twenty-five percent of the initial shares as of the purchase date or 250,000 Euros, as defined in the China market by supplyingagreement. As of March 31, 2018, and December 31, 2017, Milestone ChinaScientific has recorded a liability of $295,000 relating to the estimated additional shares that would have to be issued according this provision in the Agreement. The asset purchase price of approximately $2,639,000, net of expenses has been capitalized and will amortized over their three-year estimated useful life.

Amortization expense was $237,366 and $17,682 for the three months ended March 31, 2018 and 2017, respectively. The annual amortization expense expected to be recorded for existing intangibles assets for the next five years from the balance sheet date of March 31, 2018 are as follows: $927,000, $920,000, $259,000, $39,000 and $39,000, respectively.

NOTE 10 — STOCKHOLDERS’ EQUITY

Shares to be Issued

As of March 31, 2018, and December 31, 2017, there were 1,699,323 and 1,401,247 shares of common stock, respectively, whose issuance has been deferred under the terms of an employment agreements with the STA Single Tooth Anesthesia System®Chief Executive Officer, Chief Financial Officer and related hand pieces, while eliminatingother employees of Milestone Scientific. Such shares will be issued to each such person upon termination of their employment. The number of shares was fixed at the burden ondate of grant and were fully vested upon grant date.

Shares Reserved for Future Issuance

As of March 31, 2018, and December 31, 2017 there were 5,209,658 and 5,111,582 shares reserved for future issuance and 3,510,335, and 3,710,335 shares underlying other stock options and warrants outstanding, respectively. At March 31, 2018 and December 31, 2017, there were 1,699,323 shares and 1,401,247 shares, respectively, reserved for issuance in settlement of deferred compensation to officers of Milestone Scientific's management as a 40% minority owner.  Milestone Scientific believes that the sale will provide Milestone China with a new partner that may accelerate its penetration of the China market.

Scientific.

NOTE 11 — INCOME TAXES

Due to Milestone Scientific's history of operating losses, a full valuation allowances have been provided for all of Milestone Scientific's deferred tax assets. As of March 31, 2018, and December 31, 2017, no recognition was given to the utilization of the remaining net operating loss carryforwards in each of these periods.

The utilization of Milestone Scientific's net operating losses may be subject to a substantial limitation due to the "change of ownership provisions" under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carry forwards before their utilization. Milestone Scientific has established a 100% valuation allowance for all its deferred tax assets due to uncertainty as to their future realization.  

Accounting for uncertainties in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure and transition. At March 31, 2018, and December 31, 2017, we had no uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Statements of Operations.

No interest and penalties are present for periods open. Tax returns for the 2014,2015, 2016 and 2017 years are subject to audit by federal and state jurisdictions.

NOTE 12 — SEGMENT AND GEOGRAPHIC DATA

We conduct our business through two reportable segments dental and medical.  These segments offer different products to different customer base. The following tables present information about our reportable and operating segments:

The following table presents information about our operations by geographic area as March 31, 2018 and 2017.  Net sales by geographic area are based on the respective locations of our subsidiaries

NOTE 13 -- CONCENTRATION

Milestone Scientific has informal arrangements with a third-party manufacturer 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. In January 2017, Milestone Scientific entered into a purchase commitment for the delivery of 2,000 instruments beginning in the 4th quarter of 2017. At March 31, 2018, Milestone Scientific’s purchase commitment for this purchase order was $186,965. In January 2018, Wand Dental entered into a new purchase commitment for the delivery of 2,000 devices beginning in the third quarter of 2018, Milestone Scientific’s purchase commitment for this purchase order was $1,397,440. An advance of $ 984,408 and $697,192 was recorded at March 31, 2018 and December 31, 2017, respectively. Consequently, advances on contracts have been classified as current at March 31, 2018 and December 31, 2017.  The termination of the manufacturing relationship with any of the above manufacturer 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, whether because of termination of such a relationship, would have a material adverse effect on Milestone Scientific’s financial condition, business and results of operations

For the three months ended March 31, 2018, an aggregate of approximately 54% of Milestone Scientific's net product sales were to one customer/distributor. For the three months ended March 31, 2017, an aggregate of approximately 79% of Milestone Scientific's net product sales were to two customer/distributors (one of which, Milestone China, is a related party), 52%, and 27%, respectively. Accounts receivable for the major customer/distributors amounted to an aggregate of approximately $1,923,950, or 76% of Milestone Scientific's accounts receivable, as of March 31, 2018. Accounts receivable for the major customer/distributors amounted to an aggregate of approximately $2,555,476, or 78% of Milestone Scientific's accounts receivable, as of December 31, 2017.

 NOTE 14 -- RELATED PARTY TRANSACTIONS

Milestone Scientific has a manufacturing agreement with United Systems (whose controlling shareholder, Tom Cheng, is a significant stockholder of Milestone), the principal manufacturers of its handpieces, pursuant to which it manufactures products under specific purchase orders, but without minimum purchase commitments. Purchases from this manufacturer were $351,280 and $452,352 for the three months ended March 31, 2018 and 2017, respectively. As of March 31, 2018, and December 31, 2017, Milestone Scientific owed $1,075,078 and $985,678 this manufacturer, respectively.

Milestone Scientific had no related party sales of handpieces and devices to Milestone China and Milestone China’s agent for three months ended March 31, 2018. Milestone Scientific had $1,001,800 of related party sales of handpieces and devices to Milestone China for the three months ended March 31, 2017. Milestone Scientific defers the total revenue and costs of goods sold when devices and handpieces are shipped to Milestone China and Milestone China’s agent due to market conditions and Milestone China liquidity concerns until a payment is received.

In August 2016, K. Tucker Andersen, a significant stockholder of Milestone Scientific, entered a three-year agreement with Milestone Scientific to provide financial and business strategic services. Expenses recognized on this agreement were $50,000 for the three months ended March 31, 2018 and 2017.

In January 2017, Milestone Scientific entered into a 12-month agreement with Innovest S.p.A. to provide consulting services. This agreement will renew for successive 12-month terms unless terminated by Innovest S.p.A or Milestone Scientific. Expenses recognized on this agreement were $20,000 for the three months ended March 31, 2018 and 2017.

NOTE 15 — COMMITMENTS 

(1)  Contract Manufacturing Agreement