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Item 1B. Unresolved Staff Comments

2024-03-29 compared with 2023-03-30 · 23 added, 214 removed, 8 unchanged (97% of the section changed)

Unresolved Staff Comments

Cybersecurity.

Governance Related to Cybersecurity Risks

Our board of directors, as a whole and through its committees, holds overall oversight responsibility for our risk management processes, including in relation to risks from cybersecurity threats.

Our board of directors exercises its oversight function through the audit committee, which oversees the management of risk exposure across various areas, including cybersecurity risks, in accordance with its charter.

The audit committee receives quarterly reports from our Management on the status of our cybersecurity program.

The Chair of the audit committee provides a quarterly report to the board of directors, which includes any key updates on cybersecurity matters, as applicable.

Our management team is responsible for the day-to-day administration and management of our cybersecurity program, under the direct supervision of our Chief Executive Officer currently we also work with external security service providers to support our security monitoring and threat detection capabilities and have implemented a process to report relevant findings to the Chair of audit committee where appropriate.

Cybersecurity Risk Management and Strategy

We maintain a cybersecurity program, which includes processes for identification, assessment, and management of cybersecurity risks.

We conduct periodic risk assessments, including with support from external vendors, to assess our cyber program, identify potential areas of enhancement, and develop strategies for the mitigation of cyber risks.

We have implemented a process to periodically conduct security awareness training for employees.

Our team is informed about and monitor the prevention, detection, mitigation, and remediation of cybersecurity risks through various means, including by leveraging a managed security service provider and other third-party security software and technology services.

In addition, we use third-party security solutions, monitoring, and alerting tools and resources, designed to monitor, identify, and address risks from cybersecurity threats.

We also have implemented processes and technologies for network monitoring and data loss prevention procedures, and from time to time review such processes and technologies.

We have not identified any cybersecurity incidents or threats that have materially affected us or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition;

however, like other companies in our industry, we and our third-party vendors may, from time to time, experience threats and security incidents relating to our and our third-party vendors’ information systems.

See Item 1A “Risk Factors” in this Annual Report on Form 10 K for more information.

Description of Property

The headquarters for Milestone Scientific is located at 425 Eagle Rock Avenue, Roseland, New Jersey 07068, and our telephone number is (973) 535-2717.

In August 2019, the Company signed a seven year lease for a facility in Roseland, New Jersey (the “Roseland Facility”).

The Roseland Facility carries monthly lease payments of $9,275, commencing April 1, 2021.

The Company is also responsible for electric charges equal to $2.00 per square foot, which is equal to $11,130 annually, payable in equal monthly installments of $928. The Company will also be 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. A third-party distribution and logistics center in Pennsylvania handles shipping and order fulfillment on a month-to-month basis.

The headquarters for Milestone Scientific is located at 425 Eagle Rock Avenue, Roseland, New Jersey 07068, and our telephone number is (973) 535-2717.

In August 2019, the Company signed a seven-year lease for a facility in Roseland, New Jersey (the “Roseland Facility”).

The Roseland Facility carries monthly lease payments of $9,275, commencing April 1, 2021.

The Company is also responsible for electric charges equal to $2.00 per square foot, which is equal to $11,130 annually, payable in equal monthly installments of $928.

The Company will also be required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises more than the new base year amounts.

A third-party distribution and logistics center in Pennsylvania handles shipping and order fulfillment on a month-to-month basis.

Milestone Scientific does not own or intend to invest in any real property.

3 unchanged sentences

Mine Safety Disclosure

Not applicable. 

Market for Common Equity, and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities

Market Information

On June 1, 2015, our common stock was listed on the NYSE American under the symbol “MLSS”.

The following table sets forth the high and low sales prices of Milestone’s common stock for the periods presented.

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

As of March 31, 2023, we had approximat ely 99 stockholders of record of our common stock.

We believe that we have approxima tely 3,911 

beneficial owners of our common stock.

The holders of common stock are entitled to receive such dividends as may be declared by Milestone Scientific’s Board of Directors.

Milestone Scientific has not paid and does not expect to declare or pay any dividends in the foreseeable future.

Sales of Unregistered Securities

Not applicable.

Selected Financial Data

Milestone Scientific is a “smaller reporting company”

as defined by Regulations S-K and as such, is not required to provide the information contained in this item pursuant to Regulation S-K. 

Management ’

s Discussion and Analysis of Financial Condition and Results of Operations

The following discussions of the financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this annual report.

Certain statements in this discussion and elsewhere in this report constitute forward-looking statements, within the meaning of section 21E of the Exchange Act, that involve risks and uncertainties.

The actual results may differ materially from those anticipated in these forward-looking statements.

See "Risk Factors" elsewhere in this Form 10-K.

Milestone Scientific is a biomedical technology research and development company that patents, designs, develops and commercializes innovative diagnostic and therapeutic injection technologies and devices for medical, dental and cosmetic use.

Since our inception, we have engaged in pioneering proprietary, innovative, computer-controlled injection technologies, and solutions for the medical and dental markets.

We believe our technologies are proven and well established.

Our common stock was initially listed on the NYSE American on June 1, 2015, and trades under the symbol “MLSS”.

We have focused our resources on redefining the worldwide standard of care for injection techniques by making the experience more comfortable for the patient by reducing the anxiety and stress of receiving injections from the healthcare provider.

Our computer-controlled injection devices make injections precise, efficient, and virtually painless.

Milestone Scientific has developed a proprietary, computer-controlled anesthetic delivery device, using The Wand®, a single use disposable handpiece.

The device is marketed in dentistry under the trademark CompuDent ®, and STA Single Tooth Anesthesia System ®

and is suitable for all dental procedures that require local anesthetic.

Our proprietary DPS Dynamic Pressure Sensing technology®

is our technology platform that advances the development of next-generation devices.

It regulates flow rate and monitoring pressure from the tip of the needle, through platform extensions for local anesthesia for subcutaneous drug delivery, used in various dental and medical injections.

It has specific medical applications for epidural space identification in regional anesthesia procedures and intra-articular joint injections.

Milestone Scientific remains focused on advancing efforts to achieve the following three primary objectives:

Establishing Milestone’s 

DPS  Dynamic Pressure Sensing technology platform as the standard-of-care in painless and precise drug delivery, providing for the first time, objective visual and audible in-tissue pressure feedback, and continuing to expand platform applications;

Following obtaining successful FDA clearance of our first medical device, Milestone Scientific is transitioning from a research and development organization to a commercially focused medical device company;

Expanding our global footprint of our CompuFlo Epidural and CathCheck System by utilizing a targeted field sales force and partnering with distribution companies worldwide.

Because of combining the ability to regulate the flow rate and monitor pressure at the tip of the needle, Milestone Scientific developed the industry’s first solution for painlessly administering an intra-ligamentary injection, i.e., “

single-tooth anesthesia ”

which could be used as the only injection necessary for achieving dental anesthesia, foregoing the need to administer traditional injections such as a nerve branch block. In addition to single-tooth anesthesia , the STA System can effectively perform all the traditional injections that dentists routinely give but can provide them virtually pain free and with numerous clinical advantages.

This device, which also utilizes a disposable handpiece, is currently marketed by Milestone Scientific as the Wand  

System. 

Our dental devices have been used to administer tens of millions of injections worldwide.

Each of our devices has a related single use disposable handpiece, leading to a continuing revenue stream following sale of the device.

At present, we sell disposable handpieces unique to our legacy product (the Wand and CompuDent ) to users who have not upgraded to our current dental product, the Wand  

STA System. 

Building on the success of our proprietary, core technology platform for dental injections, and desiring to pursue other growth opportunities, we have recently begun to expand the uses and applications of our proprietary, patented technologies to achieve greater operational efficiencies, enhanced patient safety and therapeutic adherence, patient satisfaction, and improved quality of care across a broad range of medical specialties.

In June 2017, we received FDA regulatory clearance to sell the CompuFlo Epidural Computer Controlled Anesthesia System in the United States for certain medical applications.

We intend to continue to expand the uses and applications of our DPS Dynamic Pressure Sensing technology. We believe that we and our technology solutions are widely recognized by key opinion leaders (i.e., academics, anesthesiologists and practicing dentists whose opinions are widely respected), industry experts and medical and dental practitioners as a leader in the emerging, computer-controlled injection industry.

Wand/STA Dental Product

Since its market introduction in early 2007, the Wand STA System and prior C-CLAD devices have been used to deliver over 80 million safe, effective, and comfortable injections.

The instrument has also been favorably evaluated in numerous peer-reviewed, published clinical studies and associated articles.

Moreover, there appears to be a growing consensus among users that the STA Instrument is proving to be a valuable and beneficial instrument that is positively impacting the practice of dentistry worldwide.

Medical Market Product

During 2016, Milestone Scientific filed for 510(k) marketing clearance with the U.S.

Food and Drug Administration (FDA) for both intra-articular and epidural injections with the CompuFlo Epidural System. 

In June 2017, the FDA approved the CompuFlo Epidural System for epidural injections.

The following table shows a breakdown of Milestone Scientific’s product sales (net), domestically and internationally, by business segment product category: 

For the Year Ended December 31, 2022

International:

Rest of World

International:

Total Product Sales

For the Year 

Ended December 31, 2021

International:

Rest of World

International:

Total Product Sales

Current Product Platform

Description of Business.

Summary of Critical Accounting Policies and Significant Judgments and Estimates

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, Milestone Scientific evaluates its estimates, including those related to accounts receivable, inventories, stock-based compensation, and contingencies.

Milestone Scientific bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not clear from other sources.

Actual results may differ from those estimates under different assumptions or conditions.

While significant accounting policies are more fully described in Note C to the consolidated financial statements included elsewhere in this report, Milestone Scientific believes that the following accounting policies and significant judgment and estimates are most critical in understanding and evaluating the reported financial results. 

Principles of Consolidation

Milestone Scientific's discussion and analysis of the financial condition and results of operations is based upon its consolidated financial statements that 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, and Milestone Medical.

All significant, intra-entity transactions and balances are eliminated in the consolidation. 

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 has completed the VIE analysis relating to Milestone China and Anhui Maishida Medical Technology, Co.

(“Anhui”).

Milestone Scientific has determined that due to the loss of equity investment in Anhui, the company no longer has significant influence of Anhui and therefore Anhui is not a variable interest.

Milestone Scientific has a variable interest in Milestone China, it considered the guidance in ASC 810, “Consolidation”

as it relates to determining whether Milestone China is a VIE and, if so, identifying the primary beneficiary. 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;

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 Scientific 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 CEO of Milestone China who have 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 is accounted for under the equity method.

Assessment of our Ability to Continue as a Going Concern    

In accordance with 

(“ASC”) 205-40, “Presentation of Financial Statements –

Going Concern”, the Company continually  evaluates 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.

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

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.

Total operating losses since inception of $116.4 million. 

The operating losses were $8.8 million and $7.4 million, for the years ended December 31, 2022, and 2021, respectively.

Management has prepared cashflow forecasts covering a period of 12 months from the date of issuance of these financial statements.

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 12 months.

Management believes that the Company will have sufficient cash reserves to meet its 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 devices and disposables business in the United States and worldwide, and a reduction in operating expenses.

However, the Company’s continued operations will depend on its ability to raise additional capital through various potential sources until it achieves profitability, if ever.

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 and obsolete inventory is recorded if required based on past and expected future sales, potential technological obsolescence and product expiration requirement and regulations. 

Revenue Recognition

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  the Company performs the following five steps:

identification of the promised goods or services in the contract;

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

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

allocation of the transaction price to the performance obligations based on estimated selling prices;

recognition of revenue when (or as) the Company satisfies each performance obligation.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606.

The Company derives its revenues from the sale of its products, primarily dental instruments, handpieces, and other related products.

The Company sells its products through a global distribution network and that includes both exclusive and non-exclusive distribution agreements with related and third parties.

Revenue from product sales is recognized upon transfer of control of a product to a customer, generally upon date of shipment.

For certain arrangements where the shipping terms are FOB destination, revenue is recognized upon delivery.

The Company has no obligation on product sales for any installation, set-up, or maintenance, these being the responsibility of the buyer.

Milestone Scientific's only obligation after sale is the normal commercial warranty against manufacturing defects if the alleged defective unit is returned within the warranty period. 

Results of Operations.

The following table sets forth the consolidated results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.

December 31, 2022

December 31, 2021

Operating results:

Product sales, net

Cost of products sold

Operating expenses:

Selling, general and administrative expenses

Research and development expenses

Depreciation and amortization expense

Total operating expenses

Loss from operations

Other income, and interest expense net

Net loss attributable to noncontrolling interests

Net loss attributable to Milestone Scientific Inc.

December 31, 2022

December 31, 2021

Net cash used in operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Year ended  

December 31, 2022, compared to year ended December 31, 2021.

Net sales for years ended December 31,  

2022, and 

2021were as follows:

Total sales, net

Consolidated revenue for the years ended December 31, 2022, and 2021 was approximately $8.8 million and $10.3 million, respectively.

Dental revenue for the years ended December 31, 2022 and 2021 was approximately $8.8 million and $10.1 million, respectively. 

The decrease in Dental revenue of  approximately $1.4 million for the year ended December 31, 2022, as compared to 2021 was driven by lower revenue from China of approximately $1.5 million and a decrease in domestic revenue of approximately $278,000 of which $179,000 related to an allowance for sales returns from Henry Schein due to the termination of the distribution agreement.

Dental international revenue increased approximately $347,000 compared to December 31, 2021. Medical revenue decreased approximately $100,000 for the year ended December 31, 2022 , as compared to December 31, 2021, which was primarily the result of changes to the Company’s near term commercial strategy.

Gross Profit for years ended December 31,  

2022 and 2021 were as follows:

Total gross profit

Consolidated gross profit for the years ended December 31, 2022 and 2021 decreased approximately $1.4 million or 22%. The decrease was driven by an allowance of approximately $550,000 on slow moving Medical finished goods.  

Selling, general and administrative expenses for years ended December 31,   

2022 and  

2021 were as follows:

Total selling, general and administrative expenses

Consolidated selling, general and administrative expenses for the years ended December 31, 2022 and 2021 were approximately $12.5 million and $12.7 million, respectively. The decrease of approximately $224,000 is categorized in several areas.

Employee salaries, and benefits expenses decreased approximately $886,000 during the year ended December 31, 2022 compared to the same period in 2021. The Company reduced director fees, bonuses, employee recruiting fees, and medical insurance for year ended December 31, 2022.

The Company reduced marketing expense for the year ended December 31, 2022 by approximately $86,000 due to decreased trade show participation and decrease royalties expenses by approximately $4,000.

The Company increased employee travel and professional fees by approximately $322,000 for the years ended December 31, 2022 compared to December 31, 2021 due to international commercial efforts. During year ended December 31, 2022 warehousing, and quality control expenses associated with quality assurance in connection with ISO certification and digitizing parts of our quality control increased approximately $379,000, and other selling, general and administrative expenses increased approximately $51,000 due to the additional professional services quality control required in the compliance and regulations

Research and Development  

for years ended December 31,  

2022 and 2021 were as follows:

Total research and development

Consolidated research and development expenses for the years ended December 31, 2022, and 2021, were approximately $1.2 million and $878,000, respectively. The increase of approximately $272,000 is related to the Company developing the next generation to the STA Single Tooth Anesthesia System product line.

Profit (Loss) from Operations  

for years ended December 31,  

2022 and 2021 were as follows:

Total loss from operations

The loss from operations was approximately $8.8 million and $7.4 million for the years ended December 31, 2022 and 2021, respectively. 

The increase in the loss from operations was primarily driven the decrease in gross profit.

Liquidity and Capital Resources

Milestone Scientific has incurred annual operating losses and negative cash flows from operating activities since its inception.

Milestone Scientific is actively pursuing the generation of positive cash flows from operating activities through an increase in revenue from its dental business and the medical business worldwide, and a reduction in operating expenses.

On December 31, 2022, Milestone Scientific had cash and cash equivalents of approximately $8.7 million and working capital of approximately $9.7 million.

Forthe years ended December 31, 2022 and 2021, we had cash flows used in operating activities of approximately $6.0 million and $4.0 million, respectively

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.

Contractual Obligations

The impact of the consolidated contractual obligations at December 31, 2022, expected on the liquidity and cash flows in future periods, is as follows: 

Payments Due by Period

Less than 1 Year

Operating lease obligations

Purchase obligations (1)

(1)   

Purchase obligations include agreements for the purchase of dental devices, including purchase obligations entered into post year end, which will require payment in during the year ended 2023.

Recent Accounting Pronouncements

See “Note C - Summary of Significant Accounting Policies”

to the consolidated financial statements for explanation of recent accounting pronouncements impacting Milestone Scientific.

Quantitative and Qualitative Disclosures about Market Risk

Milestone Scientific is a “smaller reporting company”

as defined by Regulation S-K and, as such, is not required to provide the information required by this item.

Financial Statements

The financial statements of Milestone Scientific required by this Item are set forth beginning on page F-1.

Change in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 1B. Unresolved Staff Comments