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MILESTONE SCIENTIFIC INC.

Form 10-Q 

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

When used in this Quarterly Report on Form 10-Q, the words “may”“may”, “will”, “should”, “expect”, “believe”, “anticipate”, “continue”, “estimate”, “project”, “intend” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding events, conditions and financial trends that may affect Milestone Scientific’s future plans of operations, business strategy, results of operations and financial condition. Milestone Scientific wishes to ensure that such statements are accompanied by meaningful cautionary statements pursuant to the safe harbor established in the Private Securities Litigation Reform Act of 1995. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Milestone Scientific’s plans and objectives are based, in part, on assumptions involving the continued expansion of its business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Milestone Scientific. Although Milestone Scientific believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate. Considering the significant uncertainties inherent in the forward-looking statements included herein, our history of operating losses that are expected to continue, requiring additional funding which we may be unable to raise capital when needed (which may force us to delay, curtail or eliminate commercialization efforts of our CompuFlo Epidural Computer Controlled Anesthesia System), the early stage operations of and relatively lack of acceptance of our medical products, relying exclusively on two third parties to manufacture our products, changes to our distribution arrangements exposes us to risks of interruption of marketing efforts and building new marketing channels, changes in our informal manufacturing arrangements made by the manufacturer of our products and disruptions at the manufacturing facility of our manufacturers, including shortages of or delays in obtaining chips and other components, exposes us to risks that may harm our business, raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights, if physicians do not accept nor use our CompuFlo Epidural Computer Controlled Anesthesia System, our ability to generate revenue from sales will be materially impaired, exposure to the risks inherent in international sales and operations, including China, and developments by competitors may render our products or technologies obsolete or non-competitive, the inclusion of such information should not be regarded as a representation by Milestone Scientific or any other person that the objectives and plans of Milestone Scientific will be achieved. Prospective investors are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and the actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such forward-looking statements should, therefore, be considered in light of various important factors, including those set forth herein and others set forth from time to time in Milestone Scientific’s reports, including without limitations,limitation, Milestone Scientific's Annual Report on Form 10-K for the year ended December 31, 20162022 filed with the Securities and Exchange Commission (the “SEC”). Milestone Scientific disclaims any intent or obligation to update such forward-looking statements.

Milestone Scientific is the owner of the following registered U.S. trademarks: CompuDent®; CompuMed®; CompuFlo®; DPS Dynamic Pressure Sensing Technology®technology®; Milestone Scientific ®; CathCheck®; the Milestone logo ®; SafetyWand®; STA Single Tooth Anesthesia System®Device®; and The Wand ®.

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 PART I—FINANCIAL INFORMATION

Part I- Financial Information

Item 1. Financial Statements

 See Notes to Condensed Consolidated Financial StatementsMILESTONE SCIENTIFIC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 See Notes to Condensed Consolidated Financial Statements

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

See Notes to Condensed Consolidated Financial StatementsMILESTONE SCIENTIFIC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THREE AND SIX MONTHS ENDED JUNE 30, 2023

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THREE AND SIX MONTHS ENDED JUNE 30, 2022

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MILESTONE SCIENTIFIC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

(UNAUDITED) 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

See Notes to Condensed Consolidated Financial Statements

MILESTONE SCIENTIFIC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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, Milestone Advanced Cosmetic,Inc., and Milestone Medical, and Milestone EducationInc. (all described below), unless the context otherwise indicates. Milestone Scientific is the owner of the following registered U.S. trademarks: CompuDent®ompuDent®; CompuMed®; CompuFlo®CompuFlo®; DPS Dynamic Pressure Sensing Technology®technology®; Milestone Scientific ®; ®;CathCheck®; the Milestone logo ®; SafetyWand®®; SafetyWand®; STA Single Tooth Anesthesia System®System®; and The Wand ®.®.

Milestone Scientific was incorporated in the State of Delaware in August 1989. Milestone Scientific has developed a proprietary, revolutionary, computer-controlled anesthetic delivery instrument, throughdevice, its DPS Dynamic Pressure Sensing Technology® System, to meet the useneeds of various subcutaneous drug delivery injections and fluid aspiration – enabling healthcare practitioners to achieve multiple unique benefits that cannot currently be accomplished with the 160-year-old manual syringe. The device, using The Wand®, a single use disposable handpiece. The instrumenthandpiece, is marketed in dentistry under the trademarktrademarks CompuDent®,CompuDent® and STA Single Tooth Anesthesia System®System®, 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, Orthopedics and a number of other disciplines. The dental instrumentsdevices are sold in the United States, Canada and in 4738 other countries. To date there have been no medical instruments sold in the United States and limited amounts sold internationally, although certain medical instruments have obtained CE mark approval and can be marketed and sold in most European countries. In June 2017, Milestone Scientific received 510(k)also has 510(k) marketing clearance from the U.S. Food and Drug Administration (FDA) on the CompuFlo® Epidural Computer Controlled Anesthesia System.System in the lumbar thoracic and cervical thoracic junction of the spinal region. In addition, certain medical devices have obtained CE mark approval and can be marketed and sold in most European countries.

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

NOTE 2-LIQUIDITYAND UNCERTAINTIES

During 2016, Milestone Scientific filed for 510(k) marketing clearance with the FDA for both intra-articular and epidural injections with the CompuFlo® Computer Controlled Anesthesia System.  In June 2017, the FDA approved the CompuFlo® Epidural Computer Controlled Anesthesia System for epidural injections.  Milestone Scientific isThe Company has evaluated whether there are conditions or events, considered in the process of introductory meetings with medical device distributorsaggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the United States and foreign markets. Milestone Scientific’s immediate focus is on marketing its epidural instrument throughout the United States and Europe.

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

In December 2016, we completed an underwritten public offering of 2,000,000 shares of common stock and warrants 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 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 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 sharesunaudited condensed consolidated financial statements 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 $2,639,000issued. Total losses since inception have been capitalized$120 million. The operating losses were $2.3 million and will amortized over their five year estimated useful life$3.6 million for three and tested for impairment assix months ended June 30, 2023, respectively. Management has prepared cash flow forecasts covering a finite lived intangible asset.

In July 2017, Milestone Scientific's Compensation Committee approved the issuanceperiod 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 on12 months from the date of the 2018 Annual Stockholder meeting, subject to approvalissuance of these financial statements. As a new or amended equity incentive plan at such meeting.)

Milestone Scientific has incurred operating losses and negative cash flows from operating activities in virtually 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 instruments and obtain regulatory approval for one of its medical instruments ( the June, 2017 FDA approvalresult of the epidural instrument),forecast, management believes that the Company has sufficient cash, along with the current cash flow and support from the dental business to mitigate the expected selling expenditures for commercialization of the Epidural medical device, as well as other operating expenditures and planned new product development programs, over the next twelve months from the filing date of this report, and thus has concluded that there is no substantial doubt about the Company’s ability to aggressively marketcontinue as a going concern. 

These forecasts include several revenue and operating expense assumptions which indicate that the Company’s current cash and liquidity is sufficient to finance the operating requirements for at least the next twelve months. Management believes that the Company will have sufficient cash reserves to meet its dental instruments.anticipated obligations for at least the next twelve months from the filing date of this report. Milestone Scientific is actively pursuing the generation of positive cash flows from operating activities through an increase in revenue from its dental business worldwide, the generation of revenue from its medical instrumentsdevices and disposables business in the United States (following June 2017 FDA approval of its CompuFlo® Computer Controlled Anesthesia System ) and worldwide, and a reductionsreduction in operating expenses. Management believes that Milestone ScientificHowever, the Company’s continued operations will have sufficient cash reserves to meetdepend on its anticipated obligations over the next twelve month period following the date of this report. However, Milestone Scientific will likely  needability to raise additional capital priorthrough various potential sources until it achieves profitability, if ever.

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

Sanctions imposed by the United States and may also needother western democracies, against Russia because of the Ukraine conflict, and any expansion of the conflict, have had and are likely to raise additional capitalcontinue to effectively launch its approved medical instrumenthave unpredictable and eventually generate positive cash flowwide-ranging effects on the domestic and global economy and financial markets, which could have an adverse effect on our business and results of operations. The conflict has caused market volatility, a sharp increase in certain commodity prices, and an increasing number and frequency of cybersecurity threats. As direct impact from the anticipated medical business.conflict, we have experienced a decrease in international sales to Ukraine and halted all sales to Russia. We will continue to monitor the situation carefully and, if necessary, take action to protect our business, operations, and financial condition.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE - 2 SUMMARY OF ACCOUNTING POLICIES

1. BasisPrinciples of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally acceptedaccepted in the United States ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission (SEC), 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 10Q10-Q and Article 8 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 condensed consolidated 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 consolidated financial statements and notes thereto for the year ended December 31, 2016, 2022, included in Milestone Scientific's Annual Report on Form 10-K.10-K.

3.Reclassifications Use of Estimates

Certain reclassifications have been madeThe preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to the 2016 financial statements to conform to the consolidated 2017 financial statement presentation. These reclassifications had no effectallowance for doubtful accounts, inventory valuation, cash flow assumptions regarding evaluations of going concern considerations, stock compensation expense, and valuation allowances on net loss or cash flows as previously reported. deferred tax assets. Actual results could differ from those estimates.

4. Variable Interest EntitiesRevenue Recognition

A variable interest entity ("VIE") isThe Company recognizes revenue when its customer obtains control of promised goods or services, in an entityamount that either (i) has insufficient equity to permitreflects the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lackconsideration which the characteristics of a controlling 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 rightCompany expects to receive benefitsin exchange for those goods or services. To perform revenue recognition, the Company performs the following five steps:

The Company derives its revenues from the entity that could potentially be significantsale of its products, primarily dental instruments, handpieces, and other related products. The Company sells its products directly 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 making ability over key operational functions within the entity.                  

Milestone Scientific is the primary beneficiary of Milestone Education as of January 2016. Accordingly, the assets and liabilities of Milestone Education are includedconsumers 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") 810 as it relates to determining whether Milestone China isUnited States and through a VIEglobal distribution network that includes both exclusive and if so, identifying the primary beneficiary. As Milestone China’s equity at risknon-exclusive distribution agreements with related 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

●   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. Management 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.

5. 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. 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 majority of credit sales are due within ninety days from invoicing. There have not been any significant credit losses incurred to date.

7. 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. Returns not within the Warranty Policy are evaluated and the customer is charged for the repair.

8. Inventories

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

9. Equity Method Investments

Investments in which Milestone Scientific has the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in the long term assets on the 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 statements of operations.

Milestone Scientific evaluates its equity method investments whenever 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. 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 five to seven years. The costs of maintenance and repairs are charged to operations as incurred.

11. Intangible Assets - Patents

Patents are recorded at cost to prepare and file the applicable documents with the US Patent Office, or internationally with the applicable governmental office in the respective country. The costs related to these patents are being amortized using the straight-line method over the estimated useful life of the patent. Patents acquired from another business entity will be amortized at the estimated average useful life of the patent. These patents are recorded at the acquisition cost and included legal fees.

12. Impairment of Long-Lived Assets

Milestone Scientific reviews long-lived assets for impairment whenever events or circumstances (i.e. a triggering event) indicate that the carrying amounts may not be recoverable. The carrying value of the assets is evaluated in relation to the operating performance and future undiscounted cash flows of the underlying assets. 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, no impairment reviews have been performed in the period ending September 30, 2017.

13. Revenue Recognitionthird parties.

Revenue from product sales is recognized netupon transfer of discounts and allowancescontrol of a product to domestic distributors, on thea customer, generally upon 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 Scientificshipment. The Company has no obligation on theseproduct 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

E-Commerce

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

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

14. ShippingFinancing and Handling CostsPayment

The Company's payment terms differ by geography and customer, but payments from distributors are required within 90 days or less from the date of shipment. The E-commerce portal sells directly to end users and accepts online payments via credit and debit cards via a third-party. These payments from the third-party are settled within two business days.

Disaggregation of Revenue

The Company operates in two operating segments: dental and medical. Therefore, results of the Company's operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting. See Note 8 for revenues by geographical market, based on the customer’s location, and product category for the three and six months ended June 30, 2023 and 2022.

5.Cash and Cash Equivalents

Milestone Scientific includes shipping considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of June 30, 2023 and handling costsDecember 31, 2022, Milestone Scientific has approximately $3.7 million and $8.7 million, respectively of cash and cash equivalents. As of June 30, 2023 and December 31, 2022, Milestone Scientific had approximately $3.4 million and $8.3 million, respectively, in cash, cash equivalents, and marketable securities in accounts that exceeded the Federal Deposit Insurance Corporation insurance limit of $250,000.

6. Marketable Securities

The Company’s marketable securities are comprised of treasury bills with original maturity greater than three months from date of purchase. The Company’s marketable securities are measured at fair value and are accounted for in accordance with ASU 2016-01. Unrealized holding gains and losses on treasury bills are recorded in net realized and unrealized gain (loss) from investments on the unaudited condensed consolidated statements of operations. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of goods sold. These costs are paid by or billed to customersthe marketable securities.

The appropriate classification of marketable securities is determined at the time of shipment for domestic shipments. International shipmentspurchase and evaluated as of each reporting balance sheet date. Investments in marketable debt and equity securities classified as available-for-sale are FOB warehouse, therefore no costs are incurred by Milestone Scientific.

15. 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 line method.

16. 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 temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

17. Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent 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. Fair Value of Financial Instruments

Fair Value Measurements:fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction betweendetermined using quoted 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 to access at the measurement date.

●    Level 2 inputs which are defined as inputs other thanor quoted prices included within Level 1for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities, 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 Declines in the fair value measurement. Our assessmentvalues of equity securities that are considered other-than-temporary, are charged to other income (expense), net. The Company considers available evidence in evaluating potential impairments of its investments, including the significance of a particular inputduration and extent to thewhich fair value measurement requires judgment,is less than cost. As of June 30, 2023, the Company held approximately $2.0 million in  U.S. treasury securities, with  maturity dates within 3 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 presentation6 months of the balance sheet asdate.

7.Accounts Receivable

The e-commerce portal sells directly to end users and accepts online payments via credit and debit cards via a third-party credit card processor. These payments are settled within 2 business days of the transactions. Sales to distributors are on credit terms. The Company assignsestimates losses from the ability or inability of its distributor to make payments on amounts billed.

Distributors credit sales are due in 90 days or less from the date of invoicing. As of June 30, 2023 and December 31, 2022, accounts receivable was recorded, net of allowance for doubtful accounts of $27,000 and $10,000, respectively.

8.Inventories

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

The valuation allowance creates a new cost basis for the inventory, and it is not subsequently marked up through a reduction in the valuation allowance based on any changes in the underlying facts and circumstances. When the valuation allowance is initially recorded, the increase to its net deferred tax asset.the allowance is recognized as an increase in cost of sales. The valuation allowance is only reduced if or when the underlying inventory is sold or destroyed, at which time cost of sales recognized would include the previous adjusted cost basis.

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

9.Basic and Diluted Net INCOME (Loss)Loss Per Common Share

Milestone Scientific presents "basic"“basic” earnings (loss) per common share applicable to common stockholders and, if applicable, "diluted"“diluted” earnings (loss) per common share applicable to common stockholders pursuant to the provisions of Statement of Financial Accounting Standards ASC Topic 260.260, “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.common shares as follows: 72,333,656 and 70,356,796 for the three months ended June 30, 2023 and 2022, respectively; and 72,048,223 and 70,585,590 for the six months ended June 30, 2023 and 2022, respectively. The calculation of diluted earnings per common share is similar tolike 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 debtwarrants were issued during the period.

10.Stock-Based Compensation 
 

Milestone Scientific accounts for stock-based compensation under ASC Topic 718, Share-Based Payment. ASC Topic 718 requires all share-based payments to employees, non-employees, directors, and officers, including grants of employee stock options, to be recognized in the unaudited condensed consolidated statements of operations over the service period, as an operating expense, based on the grant-date fair values.

NOTE - 4 CONSOLIDATION OF VARIABLE INTEREST ENTITY

11.Recent Accounting Pronouncements

Milestone Education isIn June 2016, the FASB issued ASU 2016-13,Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the guidance on measuring credit losses for certain financial assets measured at amortized cost, including trade receivables. The FASB has subsequently issued several updates to the standard, providing additional guidance on certain topics covered by the standard. This update requires entities to recognize an allowance for credit losses using a 50% owned subsidiaryforward-looking expected loss impairment model, taking into consideration historical experience, current conditions, and supportable forecasts that impact collectability.

In November 2019, the FASB issued ASU 2019-10,Financial Instruments - Credit Losses (Topic, 326), Derivatives and hedging (Topic 815), and Leases (Topic 842): Effectivedates, which deferred the effective date of Milestone Scientific which began operations in 2013 to provide training and education to dentists throughoutASU 2016-13 for 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.Company. As a result of ASU 2019-10, ASU 2016-13 is effective for all entities with fiscal years beginning after December 15, 2022, including interim periods.  As January 1, 2023, the Company adopted  ASU 2019-10,Financial Instruments - Credit Losses (Topic, 326), Derivatives and hedging (Topic 815), and Leases (Topic 842) the adoption of this dependency and relationship, we determined that we had the power to direct the activities that most significantlyASU does not have a material impact Milestone Education's economic performance, and therefore is consolidated inon our financial statements.

NOTE - 5 INVESTMENTS IN 4UNCONSOLIDATED 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. INVENTORIES

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 saleInventories consist 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.following:

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 expenseCompany has recorded an allowance on a straight line basis overslow moving Medical finished goods due to the requisite service period and in the case of performance based options over the periodslow adoption of the expected performance. For the threeepidural instruments and nine months ended September 30, 2017 Milestone Scientific recognized $299,175handpieces for approximately $1.1 million 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$1.0 million  as of SeptemberJune 30, 2017 2023 and 2016, December 31, 2022, respectively.

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. In accordance with the provisions of FASB ASC 505, Milestone Scientific re-measures the value of the grant at each presentation date unless there is a significant disincentive for non-performance or until performance has been. For the three and nine months ended September 30, 2017, Milestone Scientific recognized income of $6,067 and $12,324, respectively 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.

NOTE – 7 CONCENTRATION OF CREDIT RISK

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 equivalents with large financial institutions. At times, such investments may be in excess of the Federal Deposit Insurance Corporation insurance limit. Milestone Scientific has not experienced any losses in such accounts and believes it is not exposed to any significant credit risks. Financial instruments which potentially subject Milestone Scientific to credit risk consist principally 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 monitors 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.

NOTE – 85 — ADVANCES ON CONTRACTS

The advances on contracts represent funding of future STA inventory purchasesdevices, epidural instruments, and Epiduralepidural replacements parts. The balance of the advances Asas of SeptemberJune 30, 2017 2023 and December 31, 2016 2022 is $992,242 and $700,900,approximately $1.3 million, respectively. The advance is classified as current based on the estimated annual usage of the underlying inventory.  

NOTE 6— STOCKHOLDERS’ EQUITY

NOTE – 9 INCOME TAXESWarrants

DueThe following table summarizes information about shares issuable under warrants outstanding as of June 30, 2023:

Shares to Milestone Scientific's historyBe Issued

As of operating losses, a full valuation allowancesJune 30, 2023 and 2022, there were 2,380,068 and 1,852,789 respectively of shares to be issued whose issuance has been provided for alldeferred under the terms of employment agreements with the Chief Executive Officer, and other employees of Milestone Scientific'sScientific. Such shares will be issued to each party upon termination of their employment.

As of June 30, 2023and2022, there were 382,697 and 174,364 respectively of  shares to be issued to non-employees,  for services rendered. The number of shares was fixed at the date of grant and were fully vested upon grant date.

The following table summarizes information about shares to be issued on June 30, 2023 and 2022.

Stock Options Plans

The Milestone Scientific Inc. 2020 Equity Compensation Plan, as amended and restated (the "2020 Plan"), provides for awards of restricted common stock, restricted stock units, options to purchase common stock and other awards, up to a maximum 11,500,000 shares of common stock and expires in June 2031. Options may be granted to employees, directors, and consultants of Milestone Scientific for the purchase of shares of common stock at a price not less than the fair market value of common stock on the date of grant. In general, options become exercisable over a three-year period from the grant date and expire five years after the date of grant.

Milestone Scientific recognizes compensation expense over the requisite service period. For three and six months ended June 30, 2023 Milestone Scientific recognized approximately $229,000 and $457,000 of total employee compensation cost, respectively, recorded in general and administrative expenses on the statement of operations. For three and six months ended June 30, 2022 Milestone Scientific recognized $223,000 and $501,000 of total employee compensation cost, respectively, recorded in general and administrative expenses on the statement of operations.

A summary of option activity for employees under the plans and changes during the six months ended June 30, 2023 is presented below:     

A summary of option activity for non-employees under the plans and changes during the six months ended June 30, 2023 presented below:

For the three and six months ended June 30, 2023, Milestone Scientific recognized approximately $4,900 and $12,700 expense related to non-employee options, respectively. For the three and six months ended June 30, 2022, Milestone Scientific recognized approximately $5,000 and $10,000 expense related to non-employee options, respectively.

The information below summarizes the restricted stock award activity for the six months ended June 30, 2023.

As of June 30, 2023, there are 49,615 restricted shares granted and deferred tax assets At Septemberunder the terms of  employment agreements with each Territory Manager of Milestone Scientific. Such shares will be issued to each party upon completion of 2 years of employment. For the three and six months ended June 30, 20172023, the Company recognized stock compensation expense of approximately $9,400 and December 31, 2016, no recognition$19,000 respectively. For the three and six months ended June 30, 2022, the Company recognized negative stock compensation expense of approximately $54,000 and $27,000, respectively, due to termination of certain employees who had not vested in their grant in the current period.  For the six months ended June 30, 2023, the total unrecognized compensation expense was givenapproximately $19,000, related to unvested restricted stock awards, which the utilizationCompany expects to recognize over an estimated weighted-average period of .53 years. 

As of June 28, 2023, the Company entered into restricted stock agreements with members of the remaining net operating loss carryforwardsBoard of Directors of the Company. The Company granted 617,978 restricted stock awards with a fair market value of $0.89 per share. Such restricted stock vests as follows: 25% on the grant date in eachJune 2023, and 25% quarterly, on the first day of these periods.the following months: October 2023, January 2023, and April 2024. These awards vest immediately upon a change of control as defined in the agreements. For the three and six months of June 30, 2023, the Company recognized approximately $162,000 and $307,000 for restricted stock expenses recorded in general and administrative expenses on the statement of operations. For the six months of June 30, 2023, the total unrecognized stock compensation expense was approximately $407,000 related to non-vested restricted stock awards with the members of the Board of Directors, which the Company expects to recognize over an estimated weighted average period of .75 years. 

NOTE 7 — INCOME TAXES

The utilization of Milestone Scientific's net operating losses may be subject to a substantial limitation due to the "change of ownership provisions"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 condensed consolidated financial statements.

NOTE– 10 SIGNIFICANT CONCENTRATIONS & GEOGRAPHICAL INFORMATION8 — SEGMENT AND GEOGRAPHIC DATA

Milestone Scientific’s consolidated dental sales by productWe conduct our business through two reportable segments: Dental and by geographical regionMedical. These segments offer different products and services to different customer bases. The Company provides general corporate services to its segments; however, these services are as follows:  Revenue from the medicalnot considered when making operating decisions and assessing segment is not material as of September 2017.performance. These services are reported under “Corporate Services” below and these include costs associated with executive management, investor relations, patents, trademarks, licensing agreements, new instruments developments, financing activities and public company compliance.