What changed in this filing

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Item 1. Financial Statements

2020-08-14 compared with 2020-05-15 · 230 added, 215 removed, 445 unchanged (50% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2020

June 30, 2020

December 31, 2019

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Furniture, fixtures and equipment, net

Right of use asset

Right of use assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Accrued expenses, related party

Lease liabilities, current

Current portion of finance leases

Current operating lease right-of-use liabilities

Deferred profit, related party

Total current liabilities

Lease liability, non-current

Finance lease liabilities, non-current

Operating lease right-of-use liabilities

Total liabilities

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authorized 75,000,000 shares;

49,893,534 shares issued and 49,860,201 shares outstanding as of March 31, 2020;

63,236,164 shares issued and 63,202,831 shares outstanding as of June 30, 2020;

49,410,176 shares issued and 49,376,843 shares outstanding as of December 31, 2019;

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Product sales, net

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Loss from operations

Other expenses

Interest income

Interest income fees

Change in fair value of derivative liability

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THREE MONTHS ENDED MARCH 31, 2020 AND 2019

FOR SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Preferred Stock Shares

Preferred Stock

Common Stock Share

Common Stock Amount

Additional Paid in Capital

Accumulated Deficit

Noncontrolling Interest

Treasury Stock

Balance, January 1, 2020

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Balance, March 31, 2020

Stock based compensation

Common stock issued to employee for compensation

Common stock issued for payment of consulting services

Common stock issued to board of directors for services

Common stock issued to employees for bonuses

Common stock to be issued to employees for bonuses

Common stock issued in public offering April 6,2020

Common stock issued in public offering-June 30, 2020

Acquired controlling interest in Milestone Advanced Cosmetic Systems

Common stock issued for warrants

Balance, June 30, 2020

Preferred Stock Shares

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Common stock to be issued for payment of consulting services

Common stock to be issued to employee for compensation

Common stock to be issued to board of directors for services rendered

Common stock to be issued to board of directors for services

Common stock issued to employee for compensation

Common stock issued in public offering

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Balance, March 31, 2019

Stock based compensation

Common stock to be issued for payment of consulting services

Common stock issued to employee for compensation

Common stock to be issued to board of directors for services

Conversion of Preferred Shares to Common Stock (mandatory)

Reclassification of warrants and shares to be issued to derivative liability ( Note 9)

Balance, June 30, 2019

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

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended March 31,

Six months ended June 30

Cash flows from operating activities:

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Amortization of patents

Inventory reserve

Stock compensation

Employee bonus paid in stock

Loss (Income) from earnings on China joint venture

Change in fair value of derivative liability

Employees paid in stock

Expense paid in stock

Non-cash operating lease expense

Earnings on China joint venture

Change in fair value of derivative liability

Changes in operating assets and liabilities:

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Decrease in accounts receivable, related party

Decrease in other receivables

Decrease in other assets

(Increase) decrease in inventories

(Increase) decrease in advances on contracts

Increase in prepaid expenses and other current assets

(Decrease) increase in accounts payable

(Decrease) increase in accounts payable, related party

Decrease in prepaid expenses and other current assets

(Decrease) in accounts payable

(Decrease) in accounts payable, related party

Decrease in deferred cost, related party

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Proceeds from exercise of warrants

Payments of finance leases

Payments finance lease obligations

Net proceeds from note payable

Net proceeds from Public Placement Offering

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Shares issued to board of directors

Shares issued to board of directors for services rendered

Shares issued to employees for compensation

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Milestone Scientific is the owner of the following registered U.S.

CompuDent ® ;

DPS Dynamic Pressure Sensing technology ®;

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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 is in the process of meeting with medical device distributors within the United States and foreign markets.

Milestone Scientific’s immediate focus is on marketing its epidural device throughout the United States and Europe.

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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 document that the device met the equivalency standard required for 510(k) clearances.

Following consultation with the FDA Office of Device Evaluation, we intend to file a new 510(k) application for the device in 2020, subject to sufficient funds being available.

In November 2019 , Milestone Scientific received a letter from NYSE American LLC (the “Exchange”) stating that the Company was not in compliance with the continued listing standards as set forth in Section(s) 1003(a)(i), (ii), and (iii) of the NYSE American Company Guide (the “Company Guide”).On December 20, 2019 , the Company submitted a plan of compliance (the “Plan”) to the Exchange addressing how it intends to regain compliance with Section(s) 1003(a)(i), (ii) and (iii) of the Company Guide by May 20, 2020.

On January 24, 2019, the Company received a letter from the Exchange stating that the Company’s Plan has been accepted by the Exchange.

The Company is not yet in compliance with Section(s) 1003(a)(i), (ii) and (iii) of the Company Guide and does not expect to be in compliance by the May 20th requirement.

Following consultation with the FDA Office of Device Evaluation, we intend to file a new 510(k) application for the device in 2020.

On April 21, 2020, Milestone Scientific Inc., announced that it has validated and integrated the new CathCheck™ feature into the CompuFlo® Epidural System.

Using CathCheck™, physicians and nurses can monitor the placement of a catheter to determine the presence or absence of a pulsatile waveform (heartbeat) providing new information that can be used to determine if the catheter is in place or has become dislodged from the epidural space.

NOTE 2- LIQUIDITY AND UNCERTAINTIES

The Company has evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

In the second quarter of 2020 the Company completed two capital raises.

In April and June of 2020, the Company completed Common Stock Offerings generating net proceeds of approximately $4.6 million and $13.4 million, respectively See Note 9.

As of June 30, 2020 cash on hand was approximately $16.6 million, an increase of $15.1 million from December 31, 2019.

With the combination of these two Common Stock Offerings, the Company has sufficient liquidity to support operations beyond a year after the condensed consolidated financial statements issue date.

The coronavirus (COVID-19) that was reported to have surfaced in Wuhan, China in December 2019 and that has now spread to other countries throughout the world has and is expected to adversely impact our operations and those of our third-party partners.

Additionally, the continued spread of the virus could negatively impact the manufacture, supply, distribution and sale of our products.

As a result of the reduced hours and closings of dental offices throughout the country and the rest of the world due to the continuing spread of COVID-19, we anticipate that our revenue for the second quarter, and possibly the third quarter, will be adversely affected.

At this point in time, it is too early to determine an estimate of what those impacts will be, or the effect COVID-19 may have on our fourth quarter revenue.

In addition, it is too early to determine what the effect will be on the anticipated commercialization of our CompuFlow Epidural system as a medical device during 2020.

As a result of the reduced hours and closings of dental offices throughout the country and the rest of the world due to the continuing spread of COVID-19, we anticipate that our revenue for the third quarter, and possibly the fourth quarter, will be adversely affected.

In the quarter ending June 30, 2020, the Company has experienced a significant negative impact in dental related revenues.

At this point in time, we can identify a slow pick up in dental instrument and disposable sales through beginning in the third quarter.

However, it is still too early to determine an estimate of what those impacts will be, or the continuing effect COVID-19 may have on our third and fourth quarter revenue.

In addition, it is too early to determine what the effect will be on the anticipated commercialization of our CompuFlo Epidural system as a medical device during 2020.

The extent to which the coronavirus impacts our operations or those of our third-party partners also depend on future developments which are still highly uncertain and cannot be predicted with confidence at this time.

Such future developments could have a material adverse effect on our financial results and our ability to conduct business as expected.

NOTE 2- GOING CONCERN AND LIQUIDITY

Milestone Scientific has incurred operating losses and negative cash flows from operating activities in virtually each year since its inception.

At March 31, 2020, the Company’s cash on hand was approximately $766,000.

Based on the expected cash needed for operating activities, the Company’s current cash and liquidity is not considered sufficient to finance the operating requirements for at least the next 12 months from the filing date of this report.

These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

In April 2020, the Company completed an underwritten offering of 5,420,000 shares of its common stock and warrants to purchase up to an aggregate of 2,705,000 shares of common stock, inclusive of the underwriter’s overallotment option, for net proceeds of approximately $4.7 million.

In addition, Milestone Scientific is actively pursuing the generation of positive cash flows from operating activities through an increase in revenue from its dental business worldwide, the generation of revenue from its medical devices and disposables business in the United States and worldwide, as well as considering other strategic plans or transactions.

However, as described in Note 1, the COVID-19 pandemic is expected to have an adverse effect on the Company’s operations and cash flows for at least the next two quarters and possibly longer depending on the length and severity of the pandemic in important dental markets.

Management is actively pursuing additional financing and/or other strategic plans and transactions but can provide no assurances that such financing or other strategic plans will be available on acceptable terms, or at all.

Further, the extreme volatility in the financial markets due to COVID-19, as well as the expected non-compliance with the NYSE May 20 th , 2020 requirement (Note 1) may make it more difficult to raise sufficient capital when needed or execute other strategic plans or transactions.

These condensed consolidated financial statements have been prepared with the assumption that the Company will continue as a going concern and will be able to realize its assets and discharge its liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recover ability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted 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), Milestone Education (wholly owned) and Milestone Medical (majority owned).

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted 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), Milestone Education (wholly owned) and Milestone Medical (majority owned).

All significant, intra-entity transactions and balances have been eliminated in consolidation.

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Reclassifications

Certain reclassification has been made to the 2019 financial statements to conform to the condensed consolidated 2020 financial statement presentation.

Certain reclassification have been made to the 2019 financial statements to conform to the unaudited condensed consolidated 2020 financial statement presentation.

These reclassifications had no effect on net loss or cash flows as previously reported.

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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:

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 customer arrangements the Company performs the following five steps:

identification of the promised goods or services in the contract;

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Therefore, results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting.

See Note 10 for revenues by geographical market, and product category for the three months ended March 31, 2020 and 2019.

See Note 11 for revenues by geographical market, and product category for the six months ended June 30, 2020 and 2019.

Variable Interest Entities

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There have not been any significant credit losses incurred to date.

As of March 31, 2020, and December 31, 2019, accounts receivable was recorded, net of allowance for doubtful accounts of $10,000.

As of June 30, 2020, and December 31, 2019, accounts receivable was recorded, net of allowance for doubtful accounts of $10,000.

Inventories principally consist of finished goods and component parts stated at the lower of cost (first-in, first-out method) or net realizable value.

Inventory quantities on hand are reviewed on a quarterly basis and a provision for excess, slow moving, defective, and obsolete inventory is recorded if required based on past and expected future sales, potential technological obsolescence, and product expiration requirements.

As of March 31, 2020, and December 31, 2019 , inventory was recorded net of a valuation allowance for slow moving and defective inventory of approximately $768,000, respectively.

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 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.

Equity Method Investments

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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 useful life of the patent.

Patents and other developed technology acquired from another business entity will be amortized based on the estimated useful life of the patent.

These patents and developed technology are recorded at the acquisition cost.

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Future undiscounted cash flows include estimates of future revenues, driven by market growth rates, and estimated future costs.

On April 27, 2020, The Company, was granted a loan (the “Loan”) from Savoy Bank.

in the aggregate amount of approximately $272,000, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The Loan, which was in the form of a Note dated April 27, 2020, matures on April 27, 2022 and bears interest at a rate of 1.00% per annum, payable monthly commencing on November 26, 2020.

The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties.

Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020.

The Company intends to use the entire Loan amount for qualifying expenses.

Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

Research and Development

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Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

At March 31, 2020 and December 31, 2019 , we had no uncertain tax positions that required recognition in the condensed consolidated financial statements.

On June 30, 2020 and December 31, 2019, we had no uncertain tax positions that required recognition in the condensed consolidated financial statements.

Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the condensed consolidated statements of operations.

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In periods where there is a net loss, the two-class method of computing earnings per share does not apply as our Series A Convertible Preferred Stock did not contractually participate in our losses.

The Company did not include any portion of outstanding options, warrants or convertible preferred stock in the calculation of diluted loss per common share because all such securities are anti-dilutive for all periods presented.

Since Milestone Scientific had net losses in the three months ended March 31, 2020 and 2019, the assumed effects of the exercise of potentially dilutive outstanding stock options, warrants, and convertible preferred stock were not included in the calculation as their effect would have been anti-dilutive.

Such outstanding options, warrants, and convertible preferred stock totaled 1,875,886 and 10,942,963 at March 31, 2020 and March 31, 2019, respectively.

Since Milestone Scientific had net losses in the six months ended June 30, 2020 and 2019, 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 7,686,628 and 5,053,832 on June 30, 2020 and 2019, respectively.

Fair Value of Financial Instruments

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Our assessment of the significance of an 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.

As of March 31, 2020 the Company does not have any assets or liabilities that were measured at fair value on a recurring basis.

As of June 30, 2020 the Company does not have any assets or liabilities that were measured at fair value on a recurring basis.

The carrying amounts reported in the accompanying unaudited condensed consolidated financial statements for current assets and current liabilities approximate the fair value because of the immediate or short-term maturities of the financial instruments.

Derivative Liability

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Stock-Based Compensation

Milestone Scientific accounts for stock-based compensation under ASC Topic 718, Share-Based Payment.

Milestone Scientific accounts for stock-based compensation under ASC Topic 718, "Compensation - Stock Compensation".

ASC Topic 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the Statements of Operations over the service period, as an operating expense, based on the grant-date fair values.

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Recent Accounting Pronouncements

In June 2016, the FASB issued a new standard ASU No.2016-13, “Financial Instruments – Credit Losses” (Topic 326).

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 smaller reporting entities for fiscal years and interim periods, beginning after December 15, 2022.

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.

The adoption of this standard did not have a material effect on presentation within the statement of cash flows.

On November 28, 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-13, “Fair Value Measurement:

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ASU 2018-13 is effective for all entities with fiscal years beginning after December 15, 2019, including interim periods therein.

Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU 2018-13.

The adoption of this standard did not have a material effect on financial statement presentation.

NOTE 4 — INVENTORIES

March 31, 2020

December 31, 2019

Inventories consist of the following:

June 30, 2020

December 31, 2019

Dental finished goods, net

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Total inventories

At March 31, 2020, and December 31, 2019, there is a reserve for slow moving medical finished goods of approximately $450,000 and damaged or slow moving dental finished goods of approximately $318,000.

On June 30, 2020, there is a reserve for slow moving medical finished goods of approximately $450,000 and damaged or slow moving dental finished goods of approximately $9,500.

The reserve for the medical finished goods was primarily related to the delay in regulatory approval and commercialization of the intra-articular medical instrument.

As of December 31, 2019, there is a reserve for slow moving medical finished goods of approximately $450,000 and damaged or slow moving dental finished goods of approximately $318,000.

Approximately $308,000 of the dental finished inventory reserved at December 31, 2019 was destroyed during the second quarter of 2020.

NOTE 5 — ADVANCES ON CONTRACTS

The advances on contracts represent funding of future STA inventory purchases, epidural instruments, and epidural replacements parts.

The balance of the advances as of March 31, 2020 and December 31, 2019 is approximately $776,000 and $710,000, respectively.

The balance of the advances as of June 30, 2020 and December 31, 2019 is approximately $842,000 and $710,000, respectively.

The advance is classified as current based on the estimated annual usage of the underlying inventory.

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Milestone Scientific recorded their investment in Milestone China under the equity method of accounting.

In first quarter 2020, Milestone China and Milestone Beijing entered into a plan to merge (the Transaction) into an affiliated manufacturing company, Anhui Maishida Medical Technology, Co.

Anhui will be the surviving entity after the merger and will have complete responsibility for sales, marketing, and distribution for the Company’s dental products in China.

However, due to the COVID-19 Pandemic, the regulatory documentation for the planned merger have been placed in suspense, since applicable government offices are closed in China and Hong Kong.

In first quarter 2020, Milestone China and certain marketing affiliates entered into a plan to merge (the Transaction) into an affiliated manufacturing company, Anhui Maishida Medical Technology, Co.

Anhui will be the surviving entity after the merger and will have complete responsibility for sales, marketing, and distribution for the Company’s dental products in

However, as of June 30, 2020, due to the COVID-19 Pandemic, the regulatory documentation for the planned merger have been placed in suspense since applicable government offices are still closed in China and Hong Kong.

After completion of the Transaction, Milestone Scientific is expected to have an approximate 28.4% direct ownership in Anhui.

Milestone China and Milestone Beijing are expected to be dissolved upon completion of the merger and upon the required regulatory filings in Hong Kong and China.

Milestone China and certain marketing affiliates are expected to be dissolved upon completion of the merger and upon the required regulatory filings in China and Hong Kong.

Related Party Transactions

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During 2017 and prior to the payment default during 2018, Milestone Scientific agreed to sell inventory to Milestone China and its agent.

During 2018 Milestone Scientific entered into a payment arrangement with Milestone China to satisfy past due receivables from Milestone China and it’s agents which amounted to $2.8 million at the time of the payment arrangement.

The payment terms required payments of $200,000 per month beginning in July 2018 through November 2018 and a balloon payment of approximately $1,425,000 during December 2018.

Milestone Scientific collected $950,000 under the payment arrangement which resulted in a deferred revenue and deferred cost balance of $1.8 million and $1.25 million, respectively, prior to Milestone China’s default of the payment arrangement.

Milestone China failed to make all the payments under the arrangement and due to the default on the arrangement and Milestone China’s liquidity constraints, Milestone Scientific halted shipments to Milestone China and the Company has adjusted the accounts receivable related party and the deferred revenue related party based on the expected payment realization and recorded a reserve against the related deferred cost of $1.25 million during the fourth quarter of 2018.

As of March 31, 2020 and 2019 Milestone Scientific recognized gross revenue associated with 2018 delivered products to Milestone China and its agents of approximately zero and $50,000 respectively.

During 2018, Milestone Scientific entered into a payment arrangement with Milestone China to satisfy past due receivables from Milestone China and it is agents which amounted to $2.8 million at the time of the payment arrangement.

Milestone Scientific collected $950,000 under this arrangement, until Milestone China defaulted on the payment arrangements.

Milestone Scientific halted shipments to Milestone China and the Company has adjusted the accounts receivable related party and the deferred revenue related party based on the expected payment realization and recorded a reserve against the related deferred cost of $1.25 million during the fourth quarter of 2018.

For the three and six months ended June 30, 2020 Milestone Scientific did not ship and recognize any deferred revenue or net revenue for Milestone China and its agents, respectively.

For the three and six months ended June 30, 2019 Milestone Scientific did not ship and recognize any deferred revenue but recognized revenue of $50,000 and $100,000 for Milestone China and its agents, respectively.

United System transaction

In April of 2020, the Company entered into an agreement with United Systems, Inc., related party (see Note 13) regarding certain handpieces supplied to Milestone China in 2018, that were billed and shipped by United Systems, as well as STA instruments billed to United Systems and delivered to Milestone China, and not paid by Milestone China.

United Systems sold their entire accounts receivable due from Milestone China for the above described handpieces and STA instruments for $370,260 to Milestone Scientific.

Milestone Scientific will pay United Systems the sale price as follows;

$100,000 in cash paid in April 2020, $170,260 in shares of the Corporation’s Common Stock (priced as of the close of business on April 23, 2020, $1.59, as negotiated and agreed by all parties ) issued in June 2020, and $100,000 in cash due July 2020.

All payment have been paid.

The Company is entitled to the cash collections, if and when received, on the accounts receivable due to United Systems prior to this agreement up to approximately $1.4 million.

The Company has recorded a charge to the condensed consolidated statement of operations for $370,260 during the three months ended June 30, 2020.

Milestone Advanced Cosmetic Systems Inc.

In May 2020, Milestone Scientific finalized an agreement for the purchase of Milestone China’s 50% interest in Advanced Cosmetic Systems Inc., for the forgiveness of $900,000 in accounts receivable owed by Milestone China to Milestone Scientific (and previously fully reserved for), resulting in a noncash transaction.

Milestone China will have the option to repurchase the 50% interest in Advanced Cosmetic Systems within one year from the sale date for $900,000 in cash.

As a result of the purchase Milestone Scientific will own 100% of Advanced Cosmetic Systems Inc at the expiration of the option period.

Due to Milestone Scientific controlling financial interest both before and after the transaction the transaction has been accounted for as an equity transaction.

Gross Profit Deferral

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In accordance with ASC 323 Equity Method and Joint Ventures, Milestone Scientific has deferred 40% of the gross profit associated with recognized revenue from sales to Milestone China until that product is sold to third parties.

At March 31, 2020 and December 31, 2019, the deferred profit was $340,476, which is included in deferred profit, related party in the condensed consolidated balance sheets.

For the three months ended March 31, 2020 and 2019 Milestone Scientific recorded earnings on equity investment of $- and $9,564 respectively, for product sold by Milestone China to third parties.

At June 30, 2020 and December 31, 2019, the deferred profit was $340,476, which is included in deferred profit, related party in the condensed consolidated balance sheets.

For the three and six months ended June 30, 2020 and 2019 Milestone Scientific recorded earnings on equity investment of $- and $- and $9,564 and $58,664 respectively, for product sold by Milestone China to third parties.

Equity Method Disclosures

As a result of the COVID-19 Pandemic, as previously noted, Milestone China, Milestone Beijing and Anhui have not legally finalized the Transaction and Milestone China and Milestone Beijing have not completed the financial accounting and reporting as of and for the three months ended March 31, 2020.

As a result of the COVID-19 Pandemic, as previously noted, Milestone China, Milestone Beijing and Anhui have not legally finalized the Transaction, previously noted.

Further, Milestone China and Milestone Beijing have not completed the financial accounting and reporting as of and for the three and six months ended June 30, 2020.

Consequently, the summarized financial information (unaudited) for Milestone China, Milestone Beijing are not available and therefore not included herein.

Milestone Scientific, in previous years, reduced its investment in Milestone China to zero and had accumulated losses over the investment balance of approximately $4.3 million as of December 31, 2019, which have been suspended.

Milestone Scientific believes that its equity method portion of the expected losses for the three months ending March 31, 2020 do not have a significant impact on the consolidated financial statements of the Company.

Milestone Scientific believes that its equity method portion of Milestone China’s expected losses for the three and six months ending June 30, 2020 do not have a significant impact on and are not material to the consolidated financial statements of the Company.

NOTE 7 — PATENTS

March 31, 2020

June 30, 2020

Accumulated Amortization

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Patents are amortized utilizing the straight-line method over estimated useful lives ranging from 3 to 20 years.

Amortization expense was $13,252 for the three months ended March 31, 2020 and 2019, respectively.

Amortization expense was approximately $13,200 and $26,500 for both the three and six months ended June 30, 2020 and 2019, respectively.

NOTE 8 — NOTE PAYABLE

On April 27, 2020, the Company, was granted a loan (the “Loan”) from Savoy Bank.

in the aggregate amount of approximately $272,000, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business.

The loans and accrued interest are forgivable after seven weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period.

The Loan, matures on April 27, 2022 and bears interest at a rate of 1.00% per annum, payable monthly commencing on November 26, 2020.

The Note payable principal is due April 27, 2022 in a balloon payment if the loan is not forgiven.

The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties.

The Company intends to use the entire Loan amount for qualifying expenses.

Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, we cannot be assured that certain actions taken that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.

NOTE 9— STOCKHOLDERS’ EQUITY

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Also, in February 2019, the Company generated gross proceeds from a private placement of approximately $250,000 for 714,286 shares of common stock and warrants to purchase 178,571 shares of common stock from Bp4 S.p.A., a principal stockholder of Milestone Scientific that exercised its right to participate on a pro-rata basis on the recent public offering.

Bp4’s CEO is a director of Milestone Scientific and also Chief Executive Officer and Director of Wand Dental, a wholly owned subsidiary of Milestone Scientific.

Bp4’s CEO is a director of Milestone Scientific and at the time also Chief Executive Officer and Director of Wand Dental, a wholly owned subsidiary of Milestone Scientific.

The warrants have a term of 5 years and are exercisable at $0.50 per share.

See Note 14, Subsequent Events for more information on the equity raise in April 2020.

The following table summarizes information about shares issuable under warrants outstanding at March 31, 2020:

In the second quarter of 2020, the Company completed two public offerings.

In April 2020, a Common Stock offering generating gross proceeds of approximately $5.1 million (5,420,000 common shares and 2,710,000 warrants).

The combined price of the shares and warrants was $0.95 per share.

The warrants are exercisable at a price of $1.20 per share and have an expiration of three (3) years from the issue date.

In June 2020, the Company completed a second Common Stock offering generating gross proceeds of approximately $14.6 million (6,770,000 common shares and 3,749,000 warrants).

The combined price of the shares and warrants was $2.15 per share.

The warrants are exercisable at $2.60 and expire three (3) years from the issue date.

The following table summarizes information about shares issuable under warrants outstanding as of June 30, 2020:

Warrant shares outstanding

4 unchanged sentences

Expired or cancelled

Outstanding and exercisable at March 31, 2020

Exercisable at March 31, 2020

The following table summarizes information about shares issuable under warrants outstanding at March 31, 2019:

Outstanding and exercisable at June 30, 2020

The following table summarizes information about shares issuable under warrants outstanding as of June 30, 2019:

Warrant shares outstanding

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Expired or cancelled

Outstanding and exercisable at March 31, 2019

Exercisable at March 31, 2019

Outstanding and exercisable at June 30, 2019

PREFERRED STOCK

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SHARES TO BE ISSUED

As of March 31, 2020, there were 2,306,698 shares to be issued whose issuance has been deferred to the Chief Executive Officer, Chief Financial Officer and other employees of Milestone Scientific.

As of March 31, 2019, there were 2,127,843 shares, whose issuance has been deferred to the Chief Executive Officer, Chief Financial Officer and other employees of Milestone Scientific.

Such shares will be issued to each party upon termination of their employment.

As of March 31, 2020, and 2019, there were 159,835 and 679,867 shares, respectively, to be issued to non-employees, respectively, that will be issued to non-employees for services rendered.

As of June 30, 2020 and 2019, there were 2,370,345 and 2,185,910 shares to be issued whose issuance has been deferred to the Chief Executive Officer, Chief Financial Officer, and other employees of Milestone Scientific, respectively.

As of June 30, 2020, and 2019, there were 149,285 and 717,456 shares, respectively, to be issued to non-employees, respectively, that will be issued to non-employees for services rendered.

The number of shares was fixed at the date of grant and were fully vested upon grant date.

The following table summarizes information about shares to be issued at March 31, 2020 and 2019, respectively.

March 31, 2020

March 31, 2019

Shares-to-be-issued, outstanding January 1, 2020 and 2019, respectively

The following table summarizes information about shares to be issued on June 30, 2020 and 2019, respectively.

June 30, 2020

June 30, 2019

Shares-to-be-issued, outstanding January 1,

Granted in current period

Issued in current period

Shares-to be issued outstanding March 31, 2020 and 2019, respectively

Shares-to be issued outstanding June 30,

OUTSTANDING EQUITY INSTRUMENTS IN EXCESS OF AUTHORIZED SHARES

As a result of the shares and warrants issued in the public and private offerings as well as other issuance of common stock during 2019, the Company did not have a sufficient number of authorized shares of common stock to cover the exercise and issue of outstanding equity instruments.

Therefore, as of March 31, 2019, the warrants issued in the public and private placement were classified as liabilities.

Therefore, as of June 30, 2019, the warrants issued in the public and private placement were classified as liabilities.

As long as the warrants remained liability-classified, they were continued to be re-measured each reporting period, with any increase or decrease in value recorded as a loss or gain in the condensed consolidated statement of operations.

1 unchanged sentence

The following assumptions were used to value the warrants at the grant date:

2016 Warrants

2019 Warrants

Expected Term (years)

4 unchanged sentences

Number of shares underlying warrants granted

As these warrants are liability-classified, they were revalued at March 31, 2019 using the following assumptions:

As these warrants are liability-classified, they were revalued on June 30, 2019 using the following assumptions:

2016 Warrants

2019 Warrants

Expected Term (years)

3 unchanged sentences

Weighted average fair value of warrants granted

Additionally, approximately 90,000 of the shares to be issued were also classified as liability until there was a sufficient number of authorized shares of common stock to cover the issuance of the shares.

These shares were valued at the trading price of a share of the Company’s common stock ($0.33 upon the creation of the liability and as of March 31, 2019) and are continuously re-measured each reporting period, with any increase or decrease in value recorded as a loss or gain in the condensed consolidated statement of operations.

For the three months ended March 31, 2019 the Company has recorded a gain of approximately $40,000 in relation to the revaluation of the derivative warrants and shares to be issued.

There were no derivative instruments during the three months ended March 31, 2020.

Additionally, as of June 30, 2019 approximately 2,900,000 of the shares to be issued were also classified as a liability until there was a sufficient number of authorized shares of common stock to cover the issuance of the shares.

These shares were valued at the trading price of a share of the Company’s common stock ($0.36 upon the creation of the liability and as of June 30, 2019) and are continuously re-measured each reporting period, with any increase or decrease in value recorded as a loss or gain in the condensed consolidated statement of operations.

For the three and six months ended June 30, 2019 the Company recognized a gain of approximately $12,500 and $52,700, respectively, in relation to the revaluation of the derivative warrants and shares to be issued.

On December 17, 2019, the Company’s shareholders approved an increase to the authorized share limit to 75,000,000.

On December 17, 2019, the Company reclassified all derivative liabilities related to the insufficient number of authorized shares to stockholders’ equity.

As such, there were no derivative liabilities during the six months ended June 30, 2020.

NOTE 10 — INCOME TAXES

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These segments offer different products and services to different customer base.

The Company provides general corporate services to its segments;

however, these services are not considered when making operating decisions and assessing segment performance.

These services are reported under “Corporate Services” below and these include costs associated with executive management, investor relations, patents, trademarks, licensing agreements, new instruments developments, financing activities and public company compliance.

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

March 31, 2020

March 31, 2019

Three months ended

June 30, 2019

Six months ended

June 30, 2019

Total net sales

Operating Income (Loss):

March 31, 2020

March 31, 2019

Operating (Loss):

Three months ended

June 30, 2019

Six months ended

June 30, 2019

Total operating loss

Depreciation and Amortization:

March 31, 2020

March 31, 2019

Three months ended

June 30, 2019

Six months ended

June 30, 2019

Total depreciation and amortization

Income (loss) before taxes and equity in earnings of affiliates:

March 31, 2020

March 31, 2019

(Loss) before taxes and equity in earnings of affiliates:

Three months ended

June 30, 2019

Six months ended

June 30, 2019

Total loss before taxes and equity in earnings of affiliate

Total Assets:

March 31, 2020

December 31, 2019

The following table presents information about our operations by geographic area as March 31, 2020.

The following table presents information about our operations by geographic area for three months ended June 30, 2020 and 2019.

Net sales by geographic area are based on the respective locations of our subsidiaries:

March 31, 2020

Domestic-US & Canada

Total Domestic US & Canada

Three months ended June 30, 2020

Three months ended June 30, 2019

Total Domestic US

International ROW

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International-China

Total International

Total Product Sales

The following table presents information about our operations by geographic area as March 31, 2019.

The following table presents information about our operations by geographic area for the six months ended June 30, 2020 and 2019.

Net sales by geographic area are based on the respective locations of our subsidiaries:

March 31, 2019

Domestic-US & Canada

Total Domestic US & Canada

Six months ended June 30, 2020

Six months ended June 30, 2019

Total Domestic US

International ROW

1 unchanged sentence

International-China

Total International

Total Product Sales

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Milestone Scientific has informal arrangements with third-party manufacturers of the STA, epidural, and intra-articular devices, pursuant to which they manufacture these products under specific purchase orders but without any long-term contract or minimum purchase commitment.

Consequently, advances on contracts have been classified as current at March 31, 2020 and December 31, 2019 .

Consequently, advances on contracts have been classified as current on June 30, 2020 and December 31, 2019.

The termination of the manufacturing relationship with any of these manufacturers could have a material adverse effect on Milestone Scientific’s ability to produce and sell its products.

2 unchanged sentences

Any curtailment or interruption of the supply, because of termination of such a relationship, would have a material adverse effect on Milestone Scientific’s financial condition, business, and results of operations.

For the three months ended March 31, 2020, and 2019 an aggregate of approximately 39% and 52% of the Company’s net product sales were from one domestic distributor, respectively.

For the three months ended March 31, 2020 net product sales were 15% from one international distributor.

Accounts receivable for the domestic and international distributor amounted to approximately 59% and 10%, of Milestone Scientific's gross accounts receivable as of March 31, 2020, respectively.

Accounts receivable for the major customer/distributor amounted to approximately or 77%, of Milestone Scientific's gross accounts receivable as of December 31, 2019.

Business interruptions, including any interruptions resulting from COVID-19 could significantly disrupt our operations and could have a material adverse impact on our business.

All of our employees are located in the U.S.

In addition to our employees, we rely 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 we, or any of these third party partners encounter any disruptions to our or their respective operations or facilities, or if we 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 unforeseen disruption, then we or they may be prevented or delayed from effectively operating our or their business, respectively.

For the six months ended June 30, 2020, and 2019 an aggregate of approximately 37% and 50% of the Company’s net product sales were from one domestic distributor, respectively.

For the three months ended June 30, 2020 net product sales were 40% from one domestic distributor and 23% from one international distributor.

For the three months ended June 30, 2019 an aggregate of approximately 52% of the Company’s product sales were to one domestic customer/distributor.

Accounts receivable for the domestic and international distributor amounted to approximately or 61% and 0%, of Milestone Scientific's gross accounts receivable as of June 30, 2020, respectively.

Accounts receivable for the major domestic customer/distributor amounted to approximately or 77%, of Milestone Scientific's gross accounts receivable as of December 31, 2019.

The COVID-19 pandemic affected the Company’s operations in the second quarter and may continue to do so indefinitely thereafter.

The Company is continuously monitoring its own operations and intends to take appropriate actions to mitigate the risks arising from the COVID-19 pandemic to the best of its abilities, but there can be no assurances that the Company will be successful in doing so.

To the extent the Company is able to obtain information about and maintain communications with its customers, suppliers, vendors, and other business partners, the Company will seek to minimize disruptions to its supply chain and distribution channels, but many circumstances will be beyond the Company’s control.

Governmental action may further cause the Company to temporarily close its facilities and/or regional quarantines may result in labor shortages and work stoppages.

All of these factors may have far reaching direct and indirect impacts on the Company’s business, operations, and financial results and condition.

The ultimate extent of the effects of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments which cannot be predicted.

NOTE 13 -- RELATED PARTY TRANSACTIONS

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Milestone Scientific has a manufacturing agreement with United Systems (whose controlling shareholder, Tom Cheng, is a significant stockholder of Milestone Scientific), 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 approximately $544,000 and $338,000 for the three months ended March 31, 2020 and 2019 , respectively.

As March 31, 2020 and December 31, 2019 , Milestone Scientific owed this manufacturer approximately $928,000 and $943,000, respectively, which is included in accounts payable, related party on the condensed consolidated balance sheets.

Purchases from this manufacturer were approximately $725,000 and $505,000 for the six months ended June 30, 2020 and 2019, respectively.

As June 30, 2020 and December 31, 2019, Milestone Scientific owed this manufacturer approximately $281,000 and $943,000, respectively, which is included in accounts payable, related party on the condensed consolidated balance sheets.

In February 2019, Milestone Scientific Board of Directors granted United Systems 285,714 shares of stock at $0.35 or $100,000 for consulting services.

These shares were issued July 2019.

During 2018, Milestone Scientific through its wholly owned subsidiary, Wand Dental, entered into an agreement with United Systems.

The agreement was a Royalty Agreement for handpieces sold to Milestone China by United Systems.

United Systems will pay Wand Dental a royalty equal to the net profit that Wand Dental would have received if the handpieces were sold directly to Milestone China or its Agent.

As of March 31, 2020, and December 31, 2019, Wand Dental has deferred royalty income of $342,540 that will be recognized at the earlier of when payment of the royalties is received from United Systems or when collectability is deemed to be assured.

This receivable, deferred revenue and deferred cost is included in the reserved receivables in Note 6.

Also, during the year ended December 31, 2018, a Distribution Agreement between Wand Dental and United Systems was entered into.

Under the Distribution agreement United Systems purchased 1,000 STA instruments in June 2018, for delivery to Milestone China.

Due to the related party nature and collectability concerns Wand Dental has deferred the sale.

Milestone Scientific has deferred approximately $750,000 of related party sales of devices to Milestone China under the agreement with United Systems as of December 31, 2018.

As of December 31, 2018, Milestone Scientific recorded accounts receivable, related party and deferred revenue, related party of $750,000 and deferred cost, related of $686,365, respectively.

The deferred revenue, accounts receivable and deferred cost from this transaction are included in accounts receivable, deferred revenue and deferred cost related, party related to Milestone China disclosed on the condensed consolidated balance sheets.

This receivable, deferred revenue and deferred cost is included in the reserved receivables in Note 6.

Due to the default on the arrangement and Milestone China’s liquidity constraints, Milestone Scientific halted shipments to Milestone China.

In 2019, The Company has adjusted the accounts receivable related party and the deferred revenue related party based on the expected payment realization and recorded a reserve against the related deferred cost of $1.25 million which includes the sales to United Systems.

The amounts due from Untied Systems described above are included in the adjustments and reserves for Milestone China.

See Note 14, Subsequent Events for related parties' transaction in April 2020.

On April 29, 2020, the Board of Directors approved the purchase of United Systems accounts receivable ($370,260) See Note 6.

Milestone China

At March 31, 2020, Milestone Scientific owned a 40% interest in Milestone China.

As of March 31, 2020, and December 31, 2019, Milestone Scientific has deferred compensation and accrued pension due to Interim Chief Executive Officer of approximately $517,000 and $386,000, respectively which is included accrued expenses related party.

As of March 31, 2020, and December 31, 2019, Milestone Scientific has deferred compensation due to Chief Financial Officer of $65,600 and $56,800, respectively which is included accrued expenses related party.

As of March 31, 2020, and December 31, 2019, Milestone Scientific recorded deferred compensation for Chief Executive Officer of Wand Dental of approximately of and $433,000, and $380,000, respectively which is included accrued expenses related party.

As of June 30, 2020, Milestone Scientific owned a 40% interest in Milestone China.

As of June 30, 2020, and December 31, 2019, Milestone Scientific had deferred compensation for Chief Executive Officer of Wand Dental of approximately of and $356,000, and $380,000, respectively which is included accrued expenses related party.

In August 2016, K.

Tucker Andersen, a significant stockholder of Milestone Scientific, entered into a three-year agreement with Milestone Scientific to provide financial and business strategic services.

Expenses recognized on this agreement were $25,000 for the three months ended March 31, 2020, and 2019, respectively.

Tucker Andersen, a significant stockholder of Milestone Scientific, entered into an agreement with Milestone Scientific to provide financial and business strategic services.

Expenses recognized on this agreement were $25,000, and $50,000 for the three and six months ended June 30, 2020, and 2019, respectively.

In January 2017, Milestone Scientific entered into a twelve-month agreement with Innovest S.p.A., a significant stockholder of Milestone Scientific, to provide consulting services.

This agreement will renew for successive twelve-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, 2020, and 2019 respectively.

The Director of Clinical Affairs’ royalty fee was approximately $95,000 and $91,490 for the three months ended March 31, 2020 and 2019, respectively.

Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of $39,000 for the three months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020 and December 31, 2019 , Milestone Scientific owed the Director Clinical Affairs for royalties of approximately $467,000 and $390,000, respectively, which is included in accounts payable, related party and accrued expense, related party.

Expenses recognized on this agreement were $20,000 and $40,000 for the three and six months ended June 30, 2020, and 2019, respectively.

The Director of Clinical Affairs’ royalty fee was approximately $97,000 and $199,000 for the six months ended June 30, 2020 and 2019, respectively.

Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of $78,000 for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020 and December 31, 2019, Milestone Scientific owed the Director Clinical Affairs for royalties of approximately $284,000 and $390,000, respectively, which is included in accounts payable, related party and accrued expense, related party.

NOTE 14 — COMMITMENTS

1 unchanged sentence

In July 2019, the company entered into a new purchase commitment for the delivery of 1,400 STA CompuDent® instruments.

As of March 31, 2020, the purchase order commitment was $736,120 and advances of $313,766 are reported in inventory advances.

As of June 30, 2020, the purchase order commitment for dental instruments was $736,120 and advances of $313,766 are reported in inventory advances.

In August 2019, the Company entered a new purchase commitment for the delivery of 100 Epidural instruments beginning in 2020.

As of March 31,2020, we have an open purchase order of $299,000 for 100 Epidural instruments and have advanced $149,500 against this purchase commitment.

As of June 30, 2020, we have an open purchase order of $299,000 for 100 Epidural instruments and have advanced $149,500 against this purchase commitment.

The Company also has advances on an open purchase order for long lead items for a future purchase order for the manufacturing of Epidural instrument in 2021, in which an advance of $121,649 is reported in inventory advances.

11 unchanged sentences

The Company is also required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises in excess of new base year amounts, which are accounted for as variable lease expenses.

As of March 31, 2020, total operating lease right-of-use assets were $649,425 and total operating lease liabilities were $677,052, of which $65,034 and $612,018 were classified as current and non-current, respectively.

As of June 30, 2020, total operating lease right-of-use assets were $632,536 and total operating lease liabilities were $661,098, of which $66,682 and $594,416 were classified as current and non-current, respectively.

As of December 31, 2019, total operating right-of-use assets were $15,977 and total operating lease liabilities (current) were $15,977.

The increase in the operating right-of-use assets and total operating lease liabilities was due to the Company entering into a new real estate operating lease for its corporate headquarters (see below).

During the quarter ended March 31, 2020, the Company also entered into a five-year lease for copiers which resulted in the recognition of property and equipment and total finance lease liabilities of $43,242.

As of March 31, 2020, total finance lease liabilities were $41,800, of which $7,279 and $34,521 were classified as current and non-current, respectively.

During the six months ended June 30, 2020, the Company also entered into a five-year lease for copiers which resulted in the recognition of property and equipment and total finance lease liabilities of $43,242.

As of June 30, 2020, total finance lease liabilities were $38,704, of which $6,108 and $32,596 were classified as current and non-current, respectively.

Cash flow information related to the Company's right-of-use assets and related lease liabilities were as follows:

Three Months Ended

March 31, 2020

Three Months Ended

March 31, 2019

Three months ended June 30,

Six months ended June 30,

Cash paid for operating lease liabilities

2 unchanged sentences

Property and equipment obtained in exchange for new finance lease liabilities

(1) For the three months ended March 31, 2019, the balance includes operating leases existing as of the adoption of ASC 842 on January 1, 2019.

(1) For the Six months ended June 30, 2019, the balance includes operating leases existing as of the adoption of ASC 842 on January 1, 2019.

Weighted-average remaining lease term - operating leases (years)

5 unchanged sentences

If products produced by third parties use any of these technologies (under license from us) then the Director of Clinical Affairs will receive the corresponding percentage of the consideration received by Milestone Scientific for such sale or license.

The Director of Clinical Affairs’ royalty fee was approximately $95,000 and $91,490 for the three months ended March 31, 2020 and 2019, respectively.

See note 13 Other.

NOTE 15— SUBSEQUENT EVENTS

On April 14, 2020, the Company closed its previously announced underwritten offering of 4,750,000 shares of its common stock and warrants to purchase up to an aggregate of 2,375,000 shares of the its common stock.

Each share of common stock was sold together with a warrant to purchase 0.50 of one share of common stock at a combined price to the public of $0.95.

Gross proceeds before underwriting discounts commissions and estimated offering expenses, were approximately $4.5 million.

In addition, Milestone Scientific granted to Maxim Group LLC a 45-day option to purchase up to an additional 712,500 shares of common stock and/or warrants to purchase up to 356,250 shares of common stock for the purposes of covering any over-allotments, at the public offering price less discounts and commissions, of which Maxim Group LLC partially exercised its option to purchase 200,000 shares of common stock and warrants to purchase up to 330,000 shares of common stock.

The partial over-allotment exercise transaction also closed on April 14, 2020, bringing the total net proceeds of the offering, after underwriting discounts and commissions and estimated offering expenses, to approximately $4.3 million.

The warrants are immediately exercisable at a price of $1.20 per share of common stock and expire three years from the date of issuance.

The shares of common stock and the accompanying warrants were purchased together in the offering but were issued separately and were immediately separable upon issuance.

In connection with capital raise on April 14, 2020, Maxim exercised its over-allotment option under the Underwriting Agreement, and purchased 470,000 shares of common stock, less the Underwriter's discount and commissions and offering expenses, of $415,244.

This over-allotment exercise transaction closed on April 17, 2020.

In connection with capital raise on April 14, 2020, the Company issued 38,500 shares of common stock for warrants exercised at $1.20 for proceeds of $46,200.

In the first quarter of 2020, and through the reporting date, the effects of the effects of the COVID-19 has dramatically reduced our direct marketing capabilities at Hospitals and Medical Centers in the USA and worldwide.

Generally, all medical institutions have curtailed introduction of new instruments and procedures.

Our marketing staff continue to make telephone contact with possible clients.

The challenge of COVID-19 is expected to continue into the second and third quarter of this year as the USA and the other countries of the world, begin to slowly restart the normal business operations.

On April 21, 2020, Milestone Scientific Inc., announced that it has validated and integrated the new CathCheck™ feature into the CompuFlo® Epidural System.

This can be performed within seconds by measuring the pulsatile waveform within the epidural space.

This capability saves time and money and provides better patient care.

The Company’s equity investment joint venture in China is in the process of being restructured See Note 6.

On April 27, 2020, the Company received approximately $276,000 from a loan under the federal Paycheck Protection Program.

We will apply for forgiveness of the loan at the appropriate time in accordance with paycheck protection program.

On April 29, 2020, the Board of Directors hereby approves the settlement with United Systems for their outstanding manufacturing costs ($370,260) for handpieces supplied to Milestone China in 2018, that were billed and shipped by United Systems, and not paid by Milestone China, and $750,000 billed and shipped to Milestone China for 1,000 STA instruments in 2018.

The transaction will be so that United Systems would sell their Accounts Receivable for Milestone China for the above described handpieces and STA instruments for $370,260 to Milestone Scientific.

Milestone Scientific will pay United Systems the sale price as follows;

$100,000 in cash in April 2020, $170,260 in shares of the Corporation’s Common Stock (priced as of the close of business on April 23, 2020, $1.59, as negotiated and agreed by all parties ) and the remaining approximately $100,000 in cash in July 2020.

The closing of this transaction is pending customary closing conditions.

On April 29, 2020, the Board of Directors authorized Milestone Scientific’s purchase of Milestone China’s 50% interest in Advanced Cosmetic Systems Inc., for $900,000, to be offset by the balance owed by Milestone China to Milestone Scientific, resulting in a no cash transaction.

Additionally, Milestone China will have the option to repurchase the 50% interest in Advanced Cosmetic Systems within one year from the sale date for $900,000 in cash.

The closing of this transaction is pending customary closing conditions.

On April 29, 2020, Gian Domenico Trombetta resigned as Chief Executive Officer of Wand Dental Inc.

(“Wand Dental”), a wholly-owned subsidiary of Milestone Scientific Inc.

(the “Company”), effective May 1, 2020.

Trombetta will remain as a member of the Company’s Board of Directors.

On May 5, 2020, the Company announced that it has appointed Jan Adriaan (Arjan) Haverhals as Chief Executive Officer of Wand Dental.

In addition to his responsibilities with Wand Dental, Mr.

Haverhals will also be involved in helping drive new sales and marketing initiatives for the Company’s CompuFlo® Epidural Device.

Since the quarter ended June 30, 2020, the Company issued 37,500 shares of common stock for warrants exercised at $0.50 for proceeds of $18,750 and 15,000 shares of common stock for warrants exercised at $1.20 for proceeds of $18,000.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements