MILESTONE SCIENTIFIC INC. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Principal Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer, and Principal Accounting Officer, concluded that, as of December 31, 2023, our disclosure controls and procedures were effective at a reasonable assurance level. Management ’ s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organization of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2023, our internal control over financial reporting was effective. 29 Changes in Internal Control over Financial Reporting We routinely review our internal control over financial reporting and from time to time make changes intended to enhance the effectiveness of our internal control over financial reporting. For the year ended December 31, 2023 we made no changes to our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that we believe materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure regarding Foreign Jurisdiction that Prevent Inspections. None. 30 PART III Item 10. Directors, Executive Officers, Promoters and Control Persons and Corporate Governance; Compliance with Section 16 (a) of the Exchange Act NAME AGE POSITION DIRECTOR SINCE Neal Goldman (1) (2) (3) 80 Chairman of the Board 2019 Leonard Osser 76 Vice Chairman of the Board 1991 Jan Adriaan (Arjan) Haverhals 61 President, Chief Executive Officer, and Director 2023 Benedetta Casamento (1) (2) (3) 54 Director 2022 Gian Domenico Trombetta 63 Director 2014 Michael McGeehan (1) (2) (3) 58 Director 2017 Dr. Didier Demesmin 55 Director 2023 1. Member of the Audit Committee 2. Member of the Compensation Committee 3. Member of the Nominating and Corporate Governance Committee Neal Goldman, Chairman of the Board Neal Goldman has been a director of Milestone Scientific since 2019 and has served as Chairman of the Board since January 2023. Mr. Goldman is the President and Founder of Goldman Capital Management, Inc., a family office since 2018, which was previously an investment advisory firm founded in 1985. He was First Vice President of Research at Shearson Lehman Hutton. He has also held senior positions as a money manager and research analyst with a variety of firms including Neuberger Berman, Moseley Hallgarten Estabrook and Weeden, Bruns Nordeman, and Russ and Company. Mr. Goldman serves as Chairman of Charles & Colvard, Ltd. since 2016 and served on the board of Imageware Systems, Inc. until November 2020. He also serves on the board of Deep-Down Inc. Prior to their respective acquisitions, he served on the boards of Blyth Industries and IPASS Corporation. Mr. Goldman received his B.A. degree in Economics from The City University of New York (City College). Mr. Goldman’s professional experience and financial background have given him the expertise needed to serve as one of our directors. Leonard Osser, Vice Chairman of the Board Leonard Osser has been a director of Milestone Scientific since 1991 and has served as Milestone Scientific’s Vice Chairman of the Board since May 2021. Mr. Osser had been Interim Chief Executive Officer from December 2017 until May 2021. From July 2017 to December 2017, he had been Managing Director –China Operations. Prior to that, he served as Milestone Scientific’s Chairman from 1991 until September 2009, and during that time, from 1991 until 2007, was also Chief Executive Officer of Milestone Scientific. In September 2009, he resigned as Chairman of Milestone Scientific, but remained director, and assumed the position of Chief Executive Officer. From 1980 until the consummation of Milestone Scientific’s public offering in November 1995, Mr. Osser is the Managing Member of U.S. Asian Consulting Group, LLC, a New Jersey-based provider of consulting services specializing in distressed or turnaround situations in both the public and private markets. Mr. Osser also serves as a special consultant to the board of directors of Nexalin Technology, Inc. where he is also Managing Director of China Operations. Mr. Osser’s knowledge of our business and background with us since 1980 provides the Board with valuable leadership skills and insight into our business and accordingly, the expertise needed to serve as one of our directors. J an Adriaan (Arjan) Haverhals, President, Chief Executive Officer and Director Arjan Haverhals has been Milestone Scientific's President since September 2020, Chief Executive Officer since May 2021 and has served as the President and Chief Executive Officer of Milestone Scientific’s Dental Division (Wand Dental Inc.) since June 2020. In January 2023, Mr. Haverhals was appointed to the Board. He brings more than 30 years of sales, marketing, product development, and international expansion experience within the medical device, pharmaceutical, and other industries. Prior to joining Wand Dental and Milestone Scientific, Mr. Haverhals was senior vice president of sales at Xcentric Mold & Engineering from 2019 until 2020 where he was instrumental in increasing sales productivity and efficiency for the company's prototype injection molding services, which included leading healthcare company clients. 31 From 2012 until 2018, Mr. Haverhals worked at Straumann, LLC, a global leader in manufacturing medical and dental devices, where he held a series of senior sales and marketing roles including vice president of customer marketing & education, where he oversaw all product franchises and led the launch of more than 30 products in the North American market. He also served as senior vice president for the Nordic Region at Straumann AB, senior vice president of global sales digital solutions, which included oversight of the strategic acquisition of Etkon; and served as vice president of the Prosthetics Business Unit, where he introduced a new implant and prosthetics product line within a new market segment. He also served as senior vice president for the Nordic Region at Straumann AB, senior vice president of global sales digital solutions, which included oversight of the strategic acquisition of Etkon; and served as vice president of the Prosthetics Business Unit, where he introduced a new implant and prosthetics product line within a new market segment. He also served as vice president of global marketing & sales at Elkem AS, one of Norway's largest industrial companies. Previously, Mr. Haverhals served as executive vice president of marketing & sales at Cresco Ti Systems Sàrl, a global dental implant company, where he was responsible for turning around and managing global sales, marketing, international business. Mr. Haverhals holds an MS in Pharmacy from the University of Leyden in the Netherlands. Mr. Haverhals’ knowledge of Milestone Scientific’s day-to-day operations gives him the expertise needed to serve as one of our directors. Benedetta I. Casamento, Director Benedetta Casamento has served as a director of the Company since April 2022. Since August 2017, Ms. Casamento has served as a Retail Consultant specializing in finance, business operations, and financial planning and analysis. Ms. Casamento previously served as Chairman and President of Allyke, Inc., an artificial intelligence company creating digital imagery insights for retail and other industries, from June 2016 to August 2017. From December 2014 to April 2016, she served as Chief Executive Officer of Calypso St. Barth, a luxury boutique retailer of women’s apparel and accessories. Prior to her role as CEO at Calypso St. Barth, Ms. Casamento served as a consultant to private equity firms with portfolio interests in retail and fashion from July 2012 to December 2014. Ms. Casamento previously served as Executive Vice President, Finance & Operations of The Talbots, Inc. (“Talbots”), a specialty retailer and direct marketer of women’s apparel, accessories, and shoes, from March 2009 to July 2012. Prior to joining Talbots, Ms. Casamento served in various leadership roles within Liz Claiborne Inc. from February 1999 to November 2008, culminating in her position as President of Liz Claiborne Brands. Ms. Casamento started her career at Saks Fifth Avenue. Our Board has determined that Ms. Casamento’s extensive business experience, as well as her background in accounting and finance, qualifies her to serve on the Board. Gian Domenico Trombetta, Director Gian Domenico Trombetta has been a director of Milestone Scientific since May 2014 and served as the President and Chief Executive Officer of Milestone Scientific’s Dental Division (Wand Dental Inc.) from October 2014 until May 2020. He founded Innovest S.p.A, headquartered in Milan, Italy, in 1993, a special situation firm acting in development and distressed capital investments. He has been its President and Chief Executive Officer since its inception. He served as the Chief Executive Officer or a board member of several private commercial companies in different industries including both industrial (e.g. IT, media, web, and fashion) and holding companies. Before founding Innovest, Mr. Trombetta was Project Manager for Booz Allen & Hamilton Inc., a management consulting firm from 1988 to 1992. Mr. Trombetta holds a degree in business administration from the Luiss University in Rome, Italy, and an MBA degree from INSEAD-Fontainbleau-France. Mr. Trombetta’s business background and experience has given him the expertise needed to serve as one of our directors. Michael McGeehan, Director Michael McGeehan has been a director of Milestone Scientific since October 2017. Mr. McGeehan is a business consultant with 30 years of experience in a variety of business domains, including financial services, medical and healthcare products, consumer package goods and the software technology industry. Mr. McGeehan started his career at Metaphor Computer Systems in 1988 and then went to work at Microsoft Corporation in 1991. In 1995, Mr. McGeehan left Microsoft and founded Forefront Information Strategies, an information technology consulting firm. In 2002, Mr. McGeehan returned to Microsoft where he worked until 2017, when he returned to and re-started Forefront. Mr. McGeehan was on the Board of Directors of Wand Dental. Mr. McGeehan has a master’s in business administration from Pace University and a Bachelor of Science in Electrical Engineering and Computer Science from Marquette University. Mr. McGeehan’s professional experience and background have given him the expertise needed to serve as one of our directors. 32 Dr. Didier Demesmin, Director Dr. Demesmin is currently the Chief Executive Officer and Medical Director of University Pain Medicine Center, a position he has held since 2007. Since March 2006, Dr. Demesmin has held the position of Director of the Pain Management Department at St. Peter’s University Hospital. He is also a physician in the Departments of Pain Medicine at JFK Medical Center (since March 2007), Robert Wood Johnson University Hospital (since January 2008), Somerset Medical Center (since February 2009), Hudson Regional Hospital (since December 2010), and Saint Barnabas Hospital (since November 2013). Dr. Demesmin is also a Clinical Instructor in the Department of Medicine at Rutgers Robert Wood Johnson Medical School (since August 2006), a Clinical Assistant Professor in the Department of Physical Medicine and Rehabilitation at Rutgers Robert Wood Johnson Medical School (since July 2013), the Medical Director in the Physical Medicine and Rehabilitation and Sports Medicine Institute at St. Peter’s University Hospital (since (December 2013), and an Assistant Fellowship Program Director in the Multidisciplinary Interventional Pain Medicine Fellowship at JFK Johnson Rehabilitation Institute (since November 2013). Dr. Demesmin has been a member of the Board of Trustees of the New Jersey Society of Interventional Pain Physicians, since September 2010, and the Middlesex County Medical Society of New Jersey, since January 2010, where he held the positions of President Elect, from June 2011 to June 2012, and President, from June 2012 to June 2014. Dr. Demesmin received a BA in Psychology from Rutgers University in 1994, a Medical Degree from the University of Medicine and Dentistry of New Jersey in 2000, and an MBA from the Kellogg School of Management of Northwestern University in 2018. Mr. Demesmin’ s medical healthcare background in the field of interventional pain management and business background has given him the expertise needed to serve as one of our directors. Board Leadership Structure The Board believes that the segregation of the roles of Board Chairman and the Chief Executive Officer ensures better overall governance of the Company and provides meaningful checks and balances regarding its overall performance. This structure allows our Chief Executive Officer to focus on developing and implementing the Company’s business plans and supervising the Company’s day-to-day business operations and allows our chairman to lead the Board in its oversight and advisory roles. Because of the many responsibilities of the Board and the significant time and effort required by each of the Chairman and the Chief Executive Officer to perform their respective duties, the Company believes that having separate persons in these roles enhances the ability of each to discharge those duties effectively and enhances the Company’s prospects for success. The Company also believes that having separate positions provides a clear delineation of responsibilities for each position and fosters greater accountability of management. For the foregoing reasons, the Board has determined that its leadership structure is appropriate and in the best interest of stockholders. The Board ’ s Oversight of Risk Management The Board recognizes that companies face a variety of risks, including China operation risk, liquidity/capital accessibility risk, medical product acceptance risk, and operational risk. The Board believes an effective risk management system will (1) timely identify the material risks that we face; (2) communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant Board committee; (3) implement appropriate and responsive risk management strategies consistent with the Company’s risk profile; and (4) integrate risk management into the Company’s decision-making. The Board encourages, and management promotes, a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day business operations. The Board also continually works, with the input of management and executive officers, to assess and analyze the most likely areas of future risk for the Company. Committees of the Board The Board has standing audit, compensation, and nominating and corporate governance committees (respectively, the “Audit Committee,” the “Compensation Committee,” and the “Nominating Committee.”) 33 Compensation Committee The Compensation Committee reviews and recommends to the Board the compensation and benefits of all officers of the Company, reviews general policy matters relating to compensation and benefits of employees of the Company and administers the issuance of stock options to the Company’s officers, employees, directors, and consultants. It also provides recommendations to the Board with respect to non-employee director compensation. The Compensation Committee may not delegate its authority to any other person, other than to a subcommittee. The Compensation Committee is comprised of three members, Benedetta Casamento (Chairman), Neal Goldman and Michael McGeehan. A copy of the Compensation Committee Charter has been posted on our website at www.milestonescientific.com. For additional discussion of the Compensation Committee executive compensation objectives, see Item 11, “Objective of Executive Compensation Program.” Audit Committee The Audit Committee meets with management and the Company’s independent accountants to determine the adequacy of internal controls and other financial reporting matters. The Audit Committee’s purpose is to: (A) assist the Board in its oversight of: (i) the integrity of our financial statements; (ii) our compliance with legal and regulatory requirements; (iii) our independent auditors’ qualifications and independence; (iv) the performance of our internal audit function and independent auditors to decide whether to appoint, retain or terminate our independent auditors; and (v) the preparation of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report”); and (B) to pre-approve all audit, audit-related and other services, if any, to be provided by the independent auditors. The members of the Audit Committee are comprised of Benedetta Casamento (Chairman), Neil Goldman and Michael McGeehan, all of whom are independent as defined in the listing standards of the NYSE American and Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). A copy of the Audit Committee Charter has been posted on our website at www.milestonescientific.com . Audit Committee Financial Expert The Board has determined that Benedetta Casamento is an “audit committee financial expert,” as that term is defined in Item 407(d)(5) of Regulation S-K, and “independent” for purposes of the listing standards of the NYSE American and Section 10A(m)(3) of the Exchange Act. Nominating Committee The Nominating Committee identifies potential director nominees and evaluates their suitability to serve on the Board. Based on its evaluation, it recommends to the Board the director nominees for Board membership. In addition, the Nominating Committee also evaluates each existing Board member’s suitability for continued service as a director. The members of the Nominating Committee are Michael McGeehan (Chairman), Benedetta Casamento, and Neal Goldman. A copy of the Nominating Committee Charter has been posted on our website at www.milestonescientific.com . The Nominating Committee believes that the minimum qualifications for service as a director of the Company are that a nominee possess an ability, as demonstrated by recognized success in his or her field, to make meaningful contributions to the Board’s oversight of the business and affairs of the Company and an impeccable reputation of integrity and competence in his or her personal or professional activities. The Nominating Committee’s criteria for evaluating potential candidates include the following: an understanding of the Company’s business environment; and the possession of such knowledge, skills, expertise and diversity of experience so as to enhance the Board’s ability to manage and direct the affairs and business of the Company including, when applicable, to enhance the ability of committees of the Board to fulfill their duties and/or satisfy any independence requirements imposed by law, regulation or listing requirements. The Nominating Committee considers director candidates recommended by stockholders. In considering candidates submitted by stockholders, the Committee will take into consideration the needs of the Board and the qualifications of the candidate. The Nominating Committee may also take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held. To have a candidate considered by the Nominating Committee, a stockholder must submit the recommendation in writing and must include the following information: the name of the stockholder and evidence of the person’s ownership of Company stock, including the number of shares owned and the length of time of ownership; the name of the candidate, the candidate’s resume or a listing of his or her qualifications to be a director of the Company; and, the person’s consent to be named as a director if selected by the Nominating Committee and nominated by the Board. The Nominating Committee may also receive suggestions from current Board members, the Company’s executive officers or other sources, which may be either unsolicited or in response to requests from the Nominating Committee for such candidates. The Nominating Committee also, from time to time, may engage firms that specialize in identifying director candidates. 34 Once a person has been identified by the Nominating Committee as a potential candidate, it may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Nominating Committee determines that the candidate warrants further consideration, the Chairman or another member of the Nominating Committee may contact the person. Generally, if the person expresses a willingness to be considered and to serve on the Board, the Nominating Committee may request information from the candidate, review the person’s accomplishments and qualifications and may conduct one or more interviews with the candidate. The Nominating Committee may consider all such information considering information regarding any other candidates that it might be evaluating for membership on the Board. In certain instances, Nominating Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments. The Nominating Committee’s evaluation process does not vary based on whether a candidate is recommended by a stockholder, although, as stated above, the Board may take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held. Director Independence The Board has determined that Michael McGeehan, Benedetta Casamento, and Neal Goldman (the “Independent Directors”) are independent, as that term is defined in the listing standards of the NYSE American. In determining director independence, the Board also considered all equity awards, if any, to the Independent Directors for the year ended December 31, 2023, disclosed in “Director Compensation” below, and determined that such awards were compensation for services rendered to the Board and therefore did not impact their ability to continue to serve as Independent Directors. Stockholder Communication with the Board The Board has established a process to receive communications from stockholders. Stockholders and other interested parties may contact any member (or all members) of the Board, or the non-management directors as a group, any Board committee, or any chair of any such committee by mail or electronically. To communicate with the Board, any individual director or any group or committee of directors, correspondence should be addressed to the Board or any such individual directors or group or committee of directors by either name or title. All such correspondence should be sent “c/o Corporate Secretary” at 425 Eagle Rock Ave., Suite 403, Roseland, New Jersey 07068. All communications received as set forth in the preceding paragraph will be opened by the Corporate Secretary of the Company for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, patently offensive material or matters deemed inappropriate for the Board will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the Company’s Corporate Secretary will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the envelope is addressed. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our officers and directors, and person who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten-percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnish to us, or written representations that no Forms 5 were required, we believe that all Section 16(a) filing requirements applicable to our officers and director were complied with during the fiscal year ended December 31, 2023. Insider Trading Arrangements and Policies We have adopted an insider trading compliance policy governing the purchase, sale, and/or other dispositions of our securities by our directors, officers, and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations, and the exchange listing standards applicable to us. The insider trading policy prohibits the use of material non-public information about the Company when making decisions to purchase, sell, give away or otherwise trade in the Company’s securities or to provide such information to others outside the Company. We have established black-out periods to which covered persons are subject related to the filing of our regular reports with the Securities and Exchange Commission. The Company may impose additional black-out periods from time to time as other types of material non-public information occur when material non-public events or disclosures are pending. Covered persons are permitted to trade in the Company’s securities only when there is no black-out period in effect and such trade has been pre-cleared by the appointed Company officer, or when a qualified 10b5-1 plan has been established in accordance with federal securities laws. No covered person has adopted or terminated a Rule 10b5-1 trading plan during the last fiscal quarter of the fiscal year to which this report relates. 35 Code of Ethics Milestone Scientific has adopted a code of ethics that applies to its directors, principal executive officer, principal financial officer and other people performing similar functions. This code of ethics is posted on Milestone Scientific’s web site at www.milestonescientific.com . Milestone Scientific will also provide a copy of the Code of Ethics to any person without charge, upon written request addressed to the Chairman of the Board, Neal Goldman, at the Company’s principal executive office, located at 425 Eagle Rock Avenue Roseland, NJ 07068. Clawback Policy Our Board has adopted a written policy to recover “excess” compensation that is granted, earned, or vested based wholly or in part upon the attainment of a financial reporting measure. The compensation includes both cash-based and equity-based incentives. The compensation covered includes incentive awards awarded to any individuals (including former employees) who served as an executive officer during the three most recently completed fiscal years preceding the date on which the preparation of an accounting restatement is required, provided that the executive officers were awarded more incentive awards than they would have received if the financial statements had been prepared correctly. The recovery will include an executive incentive award even if the executive was not involved in preparing the financial statements or did not commit misconduct that led to the restatement. Restatements attributable to an inadvertent error also will subject executive officers to the recovery of previously received incentive awards. Item 11. Executive Compensation SUMMARY COMPENSATION TABLE The following Summary Compensation Table sets forth all compensation earned, in all capacities, during the fiscal years ended December 31, 2023 and 2022 by Milestone Scientific’s (i) chief executive officer and (ii) two most highly compensated executive officers, other than the chief executive officer, who were serving as executive officers at the end of the 2023 fiscal year and whose salary as determined by Regulation S-K, Item 402, exceeded $100,000 (the individuals falling within categories (i) and (ii) are collectively referred to as the “Named Executive Officers”). Name and Principal Position Year Salary Bonuses Option Awards (3) Other Compensation Total Jan Adriaan (Arjan) Haverhals (1) Chief Executive Officer and President of Milestone Scientific Inc. 2023 $ 350,000 $ 281,853 $ - $ 48,412 $ 680,265 President of Wand Dental Inc 2022 $ 350,000 $ 246,603 $ 216,385 $ 28,153 $ 841,141 Peter Milligan (2) Chief Financial Officer 2023 $ 70,000 $ 100,000 $ - $ - $ 170,000 1. Arjan Haverhals was awarded $281,000 in a discretionary performance bonus for the year ended December 31, 2023. Other compensation represents payments made for health insurance coverage of approximately $34,000 and car allowance of approximately $14,000. During 2022 he was awarded $246,000 in a discretionary performance bonus for the year ended December 31, 2022. Other compensation represents payments made for health insurance coverage of approximately $14,000 and car allowance of approximately $14,000. 2. Peter Milligan was appointed as the Chief Financial Officer of the Company February 1, 2023. He was awarded a $100,000 bonus for joining the company to be paid in shares of stock. On August 24, 2023 the Company announced that Peter Milligan resigned from the Company effective September 1, 2023. 3. The amounts in this column reflect the fair value of the options on the date of grant. For details used in the assumption calculating the fair value of the option reward, see Note C to the Financial Statements for the year ended December 31, 2023, which is located on pages F-9 through F-12 of the Company’s 2023 Annual Report on Form 10-K. Compensation cost is generally recognized over the vesting period of the award. See the table below entitled Outstanding Equity Awards on December 31, 2023. 36 Pay versus Performance Table As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid (as defined by SEC rules) and certain financial performance metrics of the Company. For further information concerning the Company’s compensation philosophy and how the Company aligns executive compensation with the Company’s performance, refer to “—Compensation Philosophy and Objectives” and “—Compensation Elements”. (a) (b) (c) (d) (e) Value of Initial Fixed $100 Investment Based on: Year Summary Compensation Table Total for PEO($) Compensation Actually Paid to PEO($) Average Summary Compensation Table Total for Non-PEO NEO's($) Average Compensation Actually Paid to Non-PEO NEO's($) Total Shareholder Return ($) Net Income ($) 2023 680,265 680,265 n/a n/a 150.00 (6,929,104 ) 2022 841,141 649,824 n/a n/a 22.86 (8,706,131 ) Calculation of Compensation Actually Paid to PEO (column b) 2023 2022 Total Summary Compensation Paid Table (SCT) - column (a) 680,265 735,024 Less: value reported under stock awards in the SCT - (85,200 ) Add: FV of unvested equity awards at year end 2022 - - Add: FV of vested awards as of the vesting date - - Compensation actually paid 680,265 649,824 (a) The amounts reported in this column are the amounts of total compensation reported for Mr. Haverhals, Chief Executive Officer, for each corresponding year in the "Total" column of the Summary Compensation Table (“SCT’) on page 12 of this proxy statement. (b) The amounts reported in this column represent the amount of compensation actually paid (“CAP”) Mr. Haverhals as computed in accordance with Item 402(v) of Regulation S-K, but do not reflect the actual amount of compensation earned by or paid to Mr. Haverhals during the applicable year. The determination of CAP begins with the total compensation reported in the SCT, which is then adjusted by equity-based and other compensation as set forth in the following table. For equity-based awards made during the year, the recorded grant date value is replaced with the estimated year-end value. For equity-based awards made in prior years that remain unvested at year-end, the estimated change in value from the beginning to the end of the year is included. For equity-based awards made in prior years, but vested during the year, the estimated change in value from the beginning of the year to the date of vesting is included: (c) The amounts reported in this column represent the average of the amounts reported for the Company's Non-CEO named executive officer’s (“NEOs”) as a group in the "Total" column of the SCT in each applicable year. There were no NEO’s at the company during 2023 and 2022, respectively. (d) The amounts reported in this column represent the average amount of CAP to the Non-CEO NEOs as a group, as computed in accordance with Item 402(v) of Regulation S-K. Since there were no adjustments to be made for these NEO’s, the amounts actually paid are equal to the SCT amounts calculated in the previous column. (e) This represents the year-end value of an initial $100 investment made at the beginning of the period. 37 Employment Contracts On March 2, 2021, the Company entered into a Royalty Sharing Agreement with Leonard Osser, pursuant to which Mr. Osser sold, transferred and assigned to the Company all of his rights in and to a certain patent application as to which he is a co-inventor with Mark Hochman, a consultant to the Company, and the Company agreed to pay to Mr. Osser, beginning May 9, 2027, half of the royalty (2.5%) on net sales that would otherwise be payable to Mark and Claudia Hochman under their existing Technology Sale Agreement, dated January 1, 2005 and amended from time to time, with the Company. In connection with the Royalty Sharing Agreement, the Hochman's agreed with the Company, pursuant to an addendum to such Technology Sale Agreement dated February 25, 2021, to reduce from 5% to 2.5% the payments due to them under their Technology Sale Agreement beginning on May 9, 2027, and thereafter with respect to dental products embodying the invention. As part of the Succession Plan of the Company, Mr. Osser agreed, pursuant to an agreement dated April 6, 2021 (the “Succession Agreement”), to restructure certain of his existing agreements with the Company, which provide for additional and broader executive support, and at such time as he elects to step down as Interim Chief Executive Officer of the Company, to become the Vice Chairman of the Board of the Company. With respect to Mr. Osser’s July 2017 Employment Agreement and July 2017 Consulting Agreement (each as previously disclosed), the compensation under the Employment Agreement was modified to reduce the overall compensation by $100,000 to $200,000, split equally between a cash amount and an amount in shares, and the compensation under the Consulting Agreement was increased by $100,000 to $200,000, equally split between a cash amount and an amount in shares, which shares were formerly payable under the Employment Agreement. If the Company terminates Mr. Osser’s employment “Without Cause,” other than due to his death or disability, or if Mr. Osser terminates his employment for “Good Reason” (both as defined in the agreement), Mr. Osser is entitled to be paid in one lump sum payment as soon as practicable following such termination: an amount equal to the aggregate present value (as determined in accordance with Section 280G(d)(4) of the Code) of all compensation pursuant to this agreement from the effective date of termination hereunder through the remainder of the Employment Term. In connection with his acceptance of the Vice Chairman position and in consideration of his services as a member of the Board and agreement to provide certain additional general consulting services, Mr. Osser was granted options to purchase 2,000,000 shares of common stock, exercisable at the fair market value of the common stock on the date of grant, vesting over the five-year period after he steps down as Interim Chief Executive Officer of the Company or ten years from the date of grant, whichever shall end first. The Company believes that the effect of such existing agreements and the Succession Agreement, all of which relate to the period after such time Mr. Osser steps down as Interim Chief Executive Officer of the Company, collectively expand Mr. Osser’s consulting to and support of the Company beyond its Chinese operations to also include its medical and other products, while enhancing the retention aspects of the Company’s relationship with Mr. Osser. On May 19, 2021, Mr. Osser resigned as Interim Chief Executive Officer of the Company and assumed the role of Vice Chairman of the Board. Compensation under the Employment Agreement and the Consulting Agreement is payable for 9.5 years from May 19, 2021. The Company recorded expenses of $200,000 related to the Employment Agreement for each of the years ended December 31, 2023 and 2022, respectively. The Company recorded expenses of $200,000 and $200,000 related to the Consulting Agreement for each of the years ended December 31, 2023 and 2022, respectively. On January 1, 2022, the Company entered into an employment agreement with Mr. Arjan Haverhals. The employment term ends December 31, 2024, unless extended by mutual written agreement. Mr. Haverhals will serve as the President and Chief Executive Officer of the Company and such other senior executive positions as accepted and determined by the Board reasonably requests. As an executive, notwithstanding the fact that he is a director, Mr. Haverhals has board observer rights. The agreement calls for a base salary of $350,000 and bonus compensation of up to $400,000 per year, comprise of three separate performance based bonuses each up to $100,000 per year, based upon the Company’s achievement of three (3) performance or financial goals, as established by the Compensation Committee in its reasonable discretion; and (ii) a discretionary bonus up to $100,000, as determined by the Compensation Committee, in its sole discretion. Satisfaction of bonus goals will be determined by the Compensation Committee from time to time in its reasonable discretion. Bonus compensation, if any, shall be payable annually in arrears thirty-three percent (33%) in cash and sixty-seven percent (67%) in shares of the Company’s common stock. Mr. Haverhals will also be entitled to reimbursement of expenses, four weeks paid vacation, a car allowance and participation in company retirement plans and health insurance reimbursement. The agreement provides for the typical termination provisions. If Mr. Haverhals is terminated for other than for cause or termination by him for good reason, he will be paid as severance, his base compensation and certain other benefits, as provided in the employment agreement, for two years after termination. Objective of Executive Compensation Program The primary objective of the executive compensation program is to attract and retain qualified, energetic managers who are enthusiastic about the mission and culture of Milestone Scientific. A further objective of the compensation program is to provide incentives and reward each manager for their contribution. In addition, Milestone Scientific strives to promote an ownership mentality among key leadership and the Board of Directors. 38 The Compensation Committee reviews and approves, or in some cases recommends for the approval of the full Board, the annual compensation procedures for the Named Executive Officers. The compensation program is designed to reward teamwork, as well as each manager’s individual contribution. In measuring the Named Executive Officers’ contribution, the Compensation Committee considers numerous factors including the growth strategic business relationships and financial performance. Regarding most compensation matters, including executive and director compensation, management provides recommendations to the Compensation Committee; however, the Compensation Committee does not delegate any of its functions to others in setting compensation. Milestone Scientific does not currently engage any consultant to advise on executive and/or director compensation matters. Stock price performance has not been a factor in determining annual compensation because the price of Milestone Scientific’s common stock is subject to a variety of factors outside of Milestone Scientific’s control. Milestone Scientific does not have an exact formula for allocating between cash and non-cash compensation. Annual CEO compensation consists of a base salary component, a bonus component (payable in a mix of cash and stock) and periodic stock option grants. It is the Compensation Committee’s intention to set totals for the CEO for cash compensation sufficiently high enough to attract and retain a strong motivated leadership team, but not so high that it creates a negative perception with the other stakeholders. The CEO receives stock option grants under the stock option plan. The number of stock options granted to the executive officer is made on a discretionary rather than a formula basis by the Compensation Committee. The CEO’s current and prior compensation is considered in setting future compensation. To some extent, the compensation plan is based on the market and the companies that compete for executive management. The elements of the plan (e.g., base salary, bonus, and stock options) are like the elements used by many companies. The exact base pay, stock option grant, and bonus amounts are chosen to balance the competing objectives of fairness to all stakeholders and attracting and retaining executive managers. Outstanding Equity Awards on December 31, 2023 Name Number of Securities Underlying Vested Options (#) Exercisable (1) Number of Securities Underlying Nonvested Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock that have not vested (#) (2) Market Value of Number of Shares or Units of Stock that have not vested (#) (3) Jan Adriaan (Arjan) Haverhals 40,000 - $ 2.13 12/23/2024 319,546 $ 220,487 119,676 96,620 $ 1.52 3/30/2025 Total 159,676 96,620 319,546 $ 220,487 Leonard Osser 703,518 - $ 1.99 12/22/2025 2,272,713 $ 1,568,172 800,000 1,200,000 2.47 4/23/2031 24,882 7,293 $ 3.11 2/9/2026 Total 1,528,400 1,207,293 2,272,713 $ 1,568,172 Grand Total 1,688,076 1,303,913 2,592,260 1,788,659 The following table includes certain information with respect to all unexercised stock options and unvested shares of common stock of Milestone Scientific outstanding owned by the Named Executive Officers on December 31, 2023. 1. Represents stock option grants at fair market value on the date of grant. 2. Issuance of the shares of common stock have been deferred until the termination of employment with Milestone Scientific in accordance with the terms of respective employment arrangements. 3. Based on the closing price per share of $0.69 as reported on the NYSE American on December 31, 2023 39 Director Compensation Fees Earned paid in cash$ Stock Awards $ Options Award $ Non-Equity Incentive Plan Compensation $ Change in pension value and nonqualified deferred compensation earnings $ All other Compensation Fees Earned paid in cash$ Total $ Fees Earned paid in cash$ Neal Goldman - 120,000 - - - - - 120,000 - Benedetta Casamento - 120,000 - - - - - 120,000 - Leonard Osser - 100,000 - - - - - 100,000 - Dr. Didier Demesmin - - - - - - - - - Michael McGeehan - 110,000 - - - - - 110,000 - Gian Domenico Trombetta - 100,000 - - - - - 100,000 - Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters The following table, together with the accompanying footnotes, sets forth information, as March 15, 2024 regarding stock ownership of all persons known by Milestone Scientific to own beneficially more than 5% of Milestone Scientific’s outstanding common stock, Named Executives, all directors, and all directors and executive officers of Milestone Scientific as a group: Names of Beneficial Owner (1) Shares of Common Stock Beneficially Owned (2) Percentage Executive Officers and Directors Jan Adriaan (Arjan) Haverhals (3) 319,546 0.42 % Neal Goldman (4) 2,112,834 2.77 % Benedetta Casamento (5) 269,659 0.35 % Michael McGeehan (6) 505,407 0.66 % Leonard Osser (7) 5,166,428 6.78 % Dr. Didier Demesmin - - % Gian Domenico Trombetta (8) 10,484,597 13.76 % All directors & executive officers as group (7 persons) 18,858,472 24.75 % 40 1. The addresses of the persons named in this table are as follows: Leonard Osser, Jan Adriaan (Arjan) Haverhals, Gian Domenico Trombetta, Neal Goldman, Michael McGeehan, Benedetta Casamento and Dr. Didier Demesmin are at 425 Eagle Rock Avenue, Roseland, New Jersey 07068. 2. A person is deemed to be a beneficial owner of securities that can be acquired by such person within 60 days from March 15, 2024, as applicable, upon the exercise of options and warrants or conversion of convertible securities. Each beneficial owner's percentage ownership is determined by assuming that options, warrants and convertible securities that are held by such person (but not held by any other person) and that are exercisable or convertible within 60 days from March 15,2024, have been exercised or converted. Except as otherwise indicated, and subject to applicable community property and similar laws, each of the persons named has sole voting and investment power with respect to the shares shown as beneficially owned. The percentages for each beneficial owner are determined based on dividing the number of shares of common stock beneficially owned by the sum of the outstanding shares of common stock on March 15,2024 and the number of shares underlying options exercisable and convertible securities convertible within 60 days from March 15, 2024 held by the beneficial owner. 3. Includes 319,546 shares to be issued at the termination of Mr. Haverhals employment agreement, and 98,424 vested stock options to purchase common stock of the Company. 4. Includes 2,112,834 shares held by Mr. Goldman. 5. Includes 269,659 shares held by Mrs. Casamento. 6. Includes 505,407 shares held by Mr. McGeehan and 21,250 shares subject to common stock warrants to purchase common stock of the Company. 7. Includes 2,744,947 shares held by Mr. Osser or his family, 2,272,713 shares to be issued at the termination of his employment agreement, and 1,279,975 vested stock options to purchase common stock of the Company. 8. Includes 608,835 shares held by Mr. Trombetta directly, 178,571 shares subject to warrants to purchase common stock of the Company in the name of Bp4 Sr. l, and 9,875,763 shares held directly by BP4 U.R.L. ("BP4") of which 5,982,906 shares were issued upon the conversion of $7 million of preferred stock at $1.17 per share, as adjusted to date. Innovest S.p.A. ("Innovest") is the controlling shareholder of BP4 and Mr. Trombetta is a controlling shareholder and director of Innovest, and, as such, is deemed to have voting and investment power over the securities held by BP4. Mr. Trombetta disclaims beneficial ownership of all securities held by BP4. Securities Authorized for Issuance under Equity Compensation Plans Equity Compensation Plan Information (as of December 31, 2023) Equity compensation plan approved by stockholders Number of Securities to be issued upon exercise of outstanding options Weighted-average exercise price of outstanding options Number of securities remaining available for future issuance under equity compensation plan Grants under our 2020 Equity Incentive Plan (4) 3,128,652 $ 2.30 9,174,520 Total 3,128,652 $ - 9,174,520 1. The 2020 plan, as amended and restated in 2021 and amended during 2023, provides for awards of restricted common stock and options to purchase up to a maximum of 11,500,000 shares of common stock and expires in December 2030. Options may be granted to employees, directors, and consultants of Milestone Scientific for the purchase of shares of common stock at a price not less than the fair market value of common stock on the date of grant. In general, options become exercisable over a three-year period from the grant date and expire five years after the date of grant. During the year ended December 31, 2023, 9,174,520 options and shares were issued. 41 Item 13. Certain Relationships and Related Transactions, and Director Independence United Systems Milestone Scientific has a supply agreement with United Systems (whose controlling shareholder, Tom Cheng, is a significant stockholder of Milestone Scientific), the principal supplier of its handpieces, pursuant to which it procures manufactured products under specific purchase orders, but without minimum purchase commitments. Purchases from this supplier were approximately 2.3 million and $3.4 million for the twelve months ended December 31, 2023, and 2022, respectively. As December 31, 2023, and December 31, 2022, Milestone Scientific owed this supplier approximately $402,000 and $819,000, respectively, which is included in accounts payable and accrued expenses related party on the consolidated balance sheets. In June 2021, the Company signed a ten-year agreement with United Systems for supplier of the handpieces. Other In December 31, 2023 and 2022 the Company had approximately $270,000 and $630,000 sales to Milestone China or agents of Milestone China, an entity in which the Company formerly had an ownership interest terminating in 2021. Consulting Agreements K. Tucker Andersen, a significant stockholder of Milestone Scientific, has an agreement with Milestone Scientific to provide financial and business strategic services. Expenses recognized on this agreement were $100,000 for years ended December 31, 2023 and 2022, respectively. The Director of Clinical Affairs’ royalty fee was approximately $485,000 and $442,000 for the years ended December 31, 2023 and 2022, respectively. Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of $156,000 and $154,000 for the year ended December 31, 2023 and 2022, respectively. As of December 31, 2023, and 2022, Milestone Scientific owed the Director Clinical Affairs for royalties of approximately $114,000 and $120,000, respectively, which is included in accounts payable, related party and accrued expense, related party, in the consolidated balance sheet. Employment Contracts On March 2, 2021, the Company entered into a Royalty Sharing Agreement with Leonard Osser, pursuant to which Mr. Osser sold, transferred and assigned to the Company all of his rights in and to a certain patent application as to which he is a co-inventor with Mark Hochman, a consultant to the Company, and the Company agreed to pay to Mr. Osser, beginning May 9, 2027, half of the royalty (2.5%) on net sales that would otherwise be payable to Mark and Claudia Hochman under their existing Technology Sale Agreement, dated January 1, 2005 and amended from time to time, with the Company. In connection with the Royalty Sharing Agreement, the Hochman's agreed with the Company, pursuant to an addendum to such Technology Sale Agreement dated February 25, 2021, to reduce from 5% to 2.5% the payments due to them under their Technology Sale Agreement beginning on May 9, 2027, and thereafter with respect to dental products embodying the invention. As part of the Succession Plan of the Company, Mr. Osser agreed, pursuant to an agreement dated April 6, 2021 (the “Succession Agreement”), to restructure certain of his existing agreements with the Company, which provide for additional and broader executive support, and at such time as he elects to step down as Interim Chief Executive Officer of the Company, to become the Vice Chairman of the Board of the Company. With respect to Mr. Osser’s July 2017 Employment Agreement and July 2017 Consulting Agreement (each as previously disclosed), the compensation under the Employment Agreement was modified to reduce the overall compensation by $100,000 to $200,000, split equally between a cash amount and an amount in shares, and the compensation under the Consulting Agreement was increased by $100,000 to $200,000, equally split between a cash amount and an amount in shares, which shares were formerly payable under the Employment Agreement. If the Company terminates Mr. Osser’s employment “Without Cause,” other than due to his death or disability, or if Mr. Osser terminates his employment for “Good Reason” (both as defined in the agreement), Mr. Osser is entitled to be paid in one lump sum payment as soon as practicable following such termination: an amount equal to the aggregate present value (as determined in accordance with Section 280G(d)(4) of the Code) of all compensation pursuant to this agreement from the effective date of termination hereunder through the remainder of the Employment Term. In connection with his acceptance of the Vice Chairman position and in consideration of his services as a member of the Board and agreement to provide certain additional general consulting services, Mr. Osser was granted options to purchase 2,000,000 shares of common stock, exercisable at the fair market value of the common stock on the date of grant, vesting over the five-year period after he steps down as Interim Chief Executive Officer of the Company or ten years from the date of grant, whichever shall end first. 42 The Company believes that the effect of such existing agreements and the Succession Agreement, all of which relate to the period after such time Mr. Osser steps down as Interim Chief Executive Officer of the Company, collectively expand Mr. Osser’s consulting to and support of the Company beyond its Chinese operations to also include its medical and other products, while enhancing the retention aspects of the Company’s relationship with Mr. Osser. On May 19, 2021, Mr. Osser resigned as Interim Chief Executive Officer of the Company and assumed the role of Vice Chairman of the Board. Compensation under the Employment Agreement and the Consulting Agreement is payable for 9.5 years from May 19, 2021. The Company recorded expenses of $200,000 related to the Employment Agreement for each of the years ended December 31, 2023 and 2022, respectively. The Company recorded expenses of $200,000 related to the Consulting Agreement for each of the years ended December 31, 2023 and 2022, respectively. On January 1, 2022, the Company entered into an employment agreement with Mr. Arjan Haverhals. The employment term ends December 31, 2024, unless extended by mutual written agreement. Mr. Haverhals will serve as the President and Chief Executive Officer of the Company and such other senior executive positions as accepted and determined by the Board reasonably requests. As an executive, notwithstanding the fact that he is a director, Mr. Haverhals has board observer rights. The agreement calls for a base salary of $350,000 and bonus compensation of up to $400,000 per year, comprise of three separate performance based bonuses each up to $100,000 per year, based upon the Company’s achievement of three (3) performance or financial goals, as established by the Compensation Committee in its reasonable discretion; and (ii) a discretionary bonus up to $100,000, as determined by the Compensation Committee, in its sole discretion. Satisfaction of bonus goals will be determined by the Compensation Committee from time to time in its reasonable discretion. Bonus compensation, if any, shall be payable annually in arrears thirty-three percent (33%) in cash and sixty-seven percent (67%) in shares of the Company’s common stock. Mr. Haverhals will also be entitled to reimbursement of expenses, four weeks’ paid vacation, a car allowance and participation in company retirement plans and health insurance reimbursement. The agreement provides for the typical termination provisions. If Mr. Haverhals is terminated for other than for cause or termination by him for good reason, he will be paid as severance, his base compensation, and certain other benefits, as provided in the employment agreement, for two years after termination. Item 14. Principal Accountant Fees and Services Audit Fees Milestone Scientific incurred aggregate audit and financial statement review fees of approximately $295,200 from Marcum for 2023. Milestone Scientific incurred audit and financial statement review fees of approximately $267,000 from Marcum and Friedman for 2022. These fees include fees for professional services rendered for the audit of our annual financial statements and the review of financial statements included in our report on Form 10-Q's or services that are normally provided in connection with statutory and regulatory filings and fees related to registration statements. Tax Fees Milestone Scientific incurred aggregate tax fees of approximately $42,000 from Marcum for 2023. Milestone Scientific incurred tax fees of approximately $40,000 from Marcum and Friedman for 2022. Audit Related Fees Milestone Scientific did not incur audit related fees from Marcum and Friedman in either 2023 or 2022. All Other Fees Milestone Scientific did not incur other accounting fees from Marcum or Friedman in either 2023 or 2022. Audit Committee Administration of the Engagement The engagements with Friedman and Marcum as the Company’s principal accountants were approved in advance by the Board and the Audit Committee. No non-audit or non-audit related services were approved by the Audit Committee in either 2023 or 2022. Audit Committee Pre-Approval Policies and Procedures The Audit Committee charter provides that the Audit Committee will pre-approve audit services and non-audit services to be provided by the independent auditors before the accountant is engaged to render these services. The Audit Committee may consult with management in the decision-making process but may not delegate this authority to management. The Audit Committee may delegate its authority to preapprove services to one or more committee members, provided that the designers present the pre-approvals to the full committee at the next committee meeting. All audit and non-audit services performed by the independent accountants have been pre-approved by the Audit Committee to assure that such services do not impair the auditors’ independence from us. 43 PART IV Item 15. Exhibits and Financial Statement Schedules a. The following documents are filed as part of this Report: 1 Financial Statements. See Index to Financial Statements on page F-1. 2 Financial Statement Schedule 3 Exhibits Certain of the following exhibits were filed as Exhibits to previous filings filed by Milestone Scientific under the Securities Act of 1933, as amended, or reports filed under the Securities and Exchange Act of 1934, as amended, and are hereby incorporated by reference. b. The following documents are filed as exhibits to this Report: Exhibit No Description 3.1 Restated Certificate of Incorporation of Milestone filed on September 6, 2013 (1) 3.2 Form of Certificate of Designation filed on April 18, 2014 (2) 3.3 Certificate of Correction to the Certificate of Designation filed on May 12, 2014 (3) 3.4 Amended and Restated By-laws of Milestone filed April 1, 2019 (4) 3.5 Certificate of Amendment to Restated Certificate of Incorporation (5) 4.1 Specimen stock certificate (6) 4.5 Description of Registrant’s Securities (7) 10.1 Lease dated November 25, 1996 between Livingston Corporate Park Associates, L.L.C. and Milestone (8) 10.2 Lease amendment dated April 28, 2004 between Livingston Corporate Park Associates, L.L.C. And Milestone (9) 10.3 2011 Equity Compensation Plan (10) 10.4 Agreement with Mark Hochman, dated July 2015 (11) 10.5 Succession Agreement between Leonard Osser and Milestone Scientific Inc. + (12) 10.6 Amended and Restated 2020 Equity Incentive Plan (13) 10.7 E mployment Agreement, dated and effective as of January 1, 2022, between Arjan Haverhals and Milestone Scientific Inc.+ (14) 10.8 Underwriting Agreement, dated as of December 10, 2023, between the Company and Maxim Group LLC (15) 10.10 Amended Employment agreement dated and effective July 5, 2023 between Arjan Haverhals and Milestone Scientific Inc. + * 14.1 Code of Ethics * 19.1 Insider Trading Policy* 21.1 List of Subsidiaries* 23.1 Consent of Marcum LLP* 31.1 Rule 13a-14(a) Certification-Chief Executive Officer* 32.1 Section 1350 Certifications-Chief Executive Officer* / *** 99.1 Clawback Policy, dated 2023* 101.INS Inline XBRL Instance Document* 101.SCH Inline XBRL Taxonomy Extension Schema Document* 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document* 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document* 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document* 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document* 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith. + Indicates management contract or compensatory plan or arrangement. 44 *** Furnished, not filed, in accordance with item 601(32) (ii) of Regulations-S-K. 1) Incorporated by reference to Milestone Scientific’s Form 10-K for the year ended December 31, 2013, Exhibit 3.1. 2) Incorporated by reference to Milestone Scientific’s Form 8-K filed with the SEC on April 18, 2014, Exhibit 10.2. 3) Incorporated by reference to Milestone Scientific’s Form 10-K for the year ended December 31, 2015, Exhibit 3.3. 4) Incorporated by reference to Milestone Scientific’s Form 10-K filed with the SEC on April 1, 2019, Exhibit 3.4. 5) Incorporated by reference to Milestone Scientific’s Form 10-K/A filed with the SEC on April 2, 2020, Exhibit 3.4. 6) Incorporated by reference to Amendment No. 1 to Milestone Scientific’s Registration Statement on Form 10-KSB for the year ended May 15, 1995 7) Incorporated by reference to Milestone Scientific’s Form 10-K filed with the SEC on March 31, 2022, Exhibit 4.6. 8) Incorporated by reference to Milestone’s Form 10-KSB for the year ended December 31, 1996. 9) Incorporated by reference to Milestone Scientific’s Form 10-K filed with the SEC on April 4, 2005, Exhibit 10.37 10) Filed as Appendix A to Milestone Scientific’s Proxy Statement filed with the SEC on May 2, 2011 and incorporated herein by reference. 11) Incorporated by reference to Milestone Scientific’s Form 10-K for the year ended December 31, 2015, Exhibit 10.11 12) Incorporated by reference to Milestone Scientific’s Form 8-K filed with the SEC on April 7, 2021, Exhibit 10.1 13) Incorporated by reference to Milestone Scientific’s Proxy Statement on Schedule 14A filed with the SEC on April 30, 2021, Appendix A 14) Incorporated by reference to Milestone Scientific’s Form 10-Q filed with the SEC on August 15, 2022, Exhibit 10.1. 15) Incorporated by reference to Milestone Scientific’s Form 8-K filed with the SEC on December 12, 2023, Exhibit 1.1. Item 16. Form 10-K Summary None 45 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Milestone Scientific Inc. By: /s/Arjan Haverhals Chief Executive Officer Date: March 29, 2024 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Date Title /s/ Neal Goldman March 29, 2024 Chairman and Director Neal Goldman /s/ Leonard Osser March 29, 2024 Vice Chairman and Director Leonard Osser /s/ Gian Domenico Trombetta March 29, 2024 Director Gian Domenico Trombetta /s/ Benedetta Casamento March 29, 2024 Director Benedetta Casamento /s/ Michael McGeehan March 29, 2024 Director Michael McGeehan /s/ Dr. Didier Demesmin March 29, 2024 Director Dr. Didier Demesmin /s/ Arjan J. Haverhals March 29, 2024 Director Arjan J. Haverhals 46 REPORT INDEX TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2023 and 2022 Report of Independent Registered Public Accounting Firm (PCAOB ID Number 688 ) F-2 Consolidated Financial Statements: Consolidated Balance Sheets F-4 Consolidated Statements of Operations F-5 Consolidated Statements of Changes in Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8- F-23 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Milestone Scientific, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Milestone Scientific, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2016 East Hanover, New Jersey March 29, 2024 F-2 MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 2,977,713 $ 8,715,279 Marketable securities 2,976,573 - Accounts receivable (net of allowance for credit losses of $ 10 K at December 31, 2023 and 2022) 312,664 693,717 Prepaid expenses and other current assets 517,785 443,872 Inventories 2,638,186 1,792,335 Advances on contracts 1,371,548 1,325,301 Total current assets 10,794,469 12,970,504 Furniture, fixtures and equipment, net 10,024 18,146 Intangibles, net 178,636 227,956 Right of use assets finance lease 8,998 17,645 Right of use assets operating lease 355,235 443,685 Other assets 24,150 24,150 Total assets $ 11,371,512 $ 13,702,086 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 689,604 $ 1,102,729 Accounts payable, related party 410,512 803,492 Accrued expenses and other payables 1,511,717 1,124,839 Accrued expenses, related party 137,189 167,549 Accrued liabilities noncontrolling interests 214,000 - Current portion of finance lease liabilities 10,264 9,365 Current portion of operating lease liabilities 103,427 91,701 Total current liabilities 3,076,713 3,299,675 Non-current portion of finance lease liabilities 434 10,698 Non-current portion of operating lease liabilities 281,853 385,279 Total liabilities $ 3,359,000 $ 3,695,652 Commitments (see Note P) Stockholders’ equity Common stock, par value $ .001 ; authorized 100,000,000 shares; 75,881,840 shares issued and 75,848,507 shares outstanding as of December 31, 2023 shares; 69,306,497 shares issued and 69,273,164 shares outstanding as of December 31, 2022; 75,881 69,306 Additional paid in capital 132,187,656 127,478,325 Accumulated deficit ( 123,339,509 ) ( 116,410,405 ) Treasury stock, at cost, 33,333 shares ( 911,516 ) ( 911,516 ) Total Milestone Scientific, Inc. stockholders' equity 8,012,512 10,225,710 Noncontrolling interest - ( 219,276 ) Total stockholders’ equity 8,012,512 10,006,434 Total liabilities and stockholders’ equity $ 11,371,512 $ 13,702,086 See notes to Consolidated Financial Statements F-3 MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2023 2022 Product sales, net $ 9,827,444 $ 8,805,906 Cost of products sold 3,034,832 3,905,092 Gross profit 6,792,612 4,900,814 Selling, general and administrative expenses 13,135,796 12,514,323 Research and development expenses 701,378 1,150,209 Depreciation and amortization expense 61,912 63,755 Total operating expenses 13,899,086 13,728,287 Loss from operations ( 7,106,474 ) ( 8,827,473 ) Interest income (expense) 125,527 54,607 Provision for income Taxes - - Loss before provision for income taxes ( 6,980,947 ) ( 8,772,866 ) Net loss ( 6,980,947 ) ( 8,772,866 ) Net loss attributable to noncontrolling interests ( 51,843 ) ( 66,735 ) Net loss attributable to Milestone Scientific Inc. $ ( 6,929,104 ) $ ( 8,706,131 ) Net loss per share applicable to common stockholders— Basic and Diluted ( 0.10 ) ( 0.12 ) Weighted average shares outstanding and to be issued— Basic and Diluted 72,775,781 70,607,338 See notes to Consolidated Financial Statements F-4 MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31 2023 AND 2022 Common Stock Shares Common Stock Amount Additional Paid in Capital Accumulated Deficit Noncontrolling Interest Treasury Stock Total Stockholder Equity Balance January 1, 2022 68,153,336 68,153 124,915,560 ( 107,704,274 ) ( 152,541 ) ( 911,516 ) 16,215,382 Stock based compensation - - 1,499,302 - - - 1,499,302 Common stock issued to be employee for bonus - - 264,385 - - - 264,385 Common stock issued to employee for compensation 30,196 30 39,973 - - - 40,003 Common stock to be issued for payment of consulting services 577,074 577 746,774 - - - 747,351 Common stock to be issued to employees for bonuses 147,338 147 ( 147 ) - - - - Common stock issued to board of directors for services 398,553 399 12,478 - - - 12,877 Net loss - - - ( 8,706,131 ) ( 66,735 ) - ( 8,772,866 ) Balance December 31, 2022 69,306,497 $ 69,306 $ 127,478,325 $ ( 116,410,405 ) $ ( 219,276 ) $ ( 911,516 ) $ 10,006,434 Stock based compensation - - 1,467,425 - - - 1,467,425 Common stock issued in public offering net of issuance cost of $ 431,849 4,765,000 4,765 2,565,336 - - - 2,570,101 Common stock issued to consultants 1,051,660 1,051 744,948 - - - 745,999 Common stock issued to be employee for compensation - - 417,500 - - - 417,500 Common stock issued to board of directors for services 758,683 759 (759 ) - - - - Repurchase of noncontrolling interest - - ( 485,119 ) - 271,119 - ( 214,000 ) Net loss - - - ( 6,929,104 ) ( 51,843 ) - ( 6,980,947 ) Balance December 31, 2023 75,881,840 75,881 132,187,656 ( 123,339,509 ) - ( 911,516 ) 8,012,512 See notes to Consolidated Financial Statements F-5 MILESTONE SCIENTIFIC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, December 31, 2023 December 31, 2022 Cash flows from operating activities: Net loss $ ( 6,980,947 ) $ ( 8,772,866 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 12,999 14,180 Amortization of intangibles 49,320 49,663 Stock based compensation 1,467,426 1,499,302 Inventory Reserve 258,011 582,299 Employees paid in stock 417,500 317,265 Expense paid in stock 745,999 747,351 Unrealized gain on marketable securities ( 9,282 ) - Bad debt expense 24,865 - Amortization of right-of-use asset 88,450 80,533 Changes in operating assets and liabilities: Decrease in accounts receivable 356,188 249,555 Increase in inventories ( 1,103,861 ) ( 833,121 ) Increase in advances ( 46,246 ) ( 16,041 ) Increase in prepaid expenses and other current assets ( 73,912 ) ( 68,512 ) (Decrease) increase in accounts payable ( 413,125 ) 322,300 (Decrease) increase in accounts payable, related party ( 392,981 ) 407,636 Increase (decrease) in accrued expenses 386,882 ( 292,495 ) (Decrease) in accrued expenses, related party ( 30,361 ) ( 246,692 ) Decrease operating right of use lease asset ( 83,054 ) ( 72,353 ) Net cash used in operating activities $ ( 5,326,129 ) $ ( 6,031,996 ) Cash flows from investing activities: Purchase of furniture, fixtures, and equipment ( 4,881 ) ( 8,527 ) Sale of Marketable securities 4,966,213 - Purchase of Marketable securities ( 7,933,504 ) - Net cash provided by (used in) in investing activities $ ( 2,972,172 ) $ ( 8,527 ) Cash flows from financing activities: Net proceeds from issuance of Common Stock 2,570,101 - Payments finance lease obligations ( 9,366 ) ( 8,544 ) Net cash provided by (used in) financing activities $ 2,560,735 $ ( 8,544 ) Net decrease in cash and cash equivalents ( 5,737,566 ) ( 6,049,067 ) Cash and cash equivalents at beginning of period 8,715,279 14,764,346 Cash and cash equivalents at end of period $ 2,977,713 $ 8,715,279 Supplemental non-cash disclosure of cash flow information: Declared repurchase of noncontrolling interest 214,000 - See notes to Consolidated Financial Statements F-6 MILESTONE SCIENTIFIC INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A — ORGANIZATION AND BUSINESS All references in this report to “Milestone Scientific,” “us,” “our,” “we,” the “Company” or “Milestone” refer to Milestone Scientific Inc., and its consolidated subsidiaries, Wand Dental, Inc., and Milestone Innovations Inc. and Milestone Education LLC (all described below), unless the context otherwise indicates. Milestone Scientific is the owner of the following registered U.S. trademarks: C ompuDent ® ; CompuMed ® ; CompuFlo ® ; DPS Dynamic Pressure Sensing technology ® ; Milestone Scientific ® ; the Milestone logo ® ; SafetyWand ® ; STA Single Tooth Anesthesia System ® ; and The Wand ® . Milestone Scientific was incorporated in the State of Delaware in August 1989. Milestone Scientific has developed a proprietary, computer-controlled anesthetic delivery 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 in medicine under the trademark CompuMed ® . CompuDent ® is suitable for all dental procedures that require local anesthetic. CompuMed ® is suitable for many medical procedures regularly performed in plastic surgery, hair restoration surgery, podiatry, colorectal surgery, dermatology, orthopedics, and many other disciplines. The dental devices are sold in the United States, Canada and in 60 other countries. Certain medical devices have obtained CE mark approval and can be marketed and sold in most European countries. In June 2017, Milestone Scientific received 510 (k) marketing clearance from the U.S. Food and Drug Administration (FDA) on the CompuFlo ® Epidural Computer Controlled Anesthesia System (“Epidural”). We are in the process of meeting with medical facilities and device distributors within the United States, Middle East and Europe. Certain of our medical instruments have obtained European CE mark approval and can be marketed and sold in most European countries. In 2020, the Company received a Notice of Allowance from the United States Patent and Trademark Office (USPTO) related to its new CompuPulse System, which combines the benefits of our CompuWave technology with a manual syringe. The new CompuPulse System allows one to identify a pulsatile pressure waveform in a variety of applications, thereby improving the reliability and safety of a drug delivery procedure. Importantly, not all procedures require the sophistication of our CompuFlo system, which precisely controls the administration and flow rate of medication as it is being administered. This new technology provides an efficient and low-cost alternative for procedures where a manual syringe may suffice, while still providing the ability to verify needle and subsequent catheter placement. NOTE B- 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. The Company has incurred total losses since inception of $ 123.3 million. The operating losses were $ 7.1 million and $ 8.8 million, for the years ended December 31, 2023, and 2022, respectively. On December 31, 2023, Milestone Scientific had cash and cash equivalents and marketable securities of approximately $ 6.0 million and working capital of approximately $ 7.7 million. For the twelve months ended December 31, 2023 and 2022, we had cash flows used in operating activities of approximately $ 5.3 million and $ 6.0 million, 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. Additionally, the Company was approved on September 12, 2023 to sell Net Operating Losses through the New Jersey Technology Business Tax Certificate Transfer Program (“NJ NOL Program”), a program administered by the New Jersey Economic Development Authority (“NJEDA”). Management believes this program will generate positive cash flow in the near future. 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. In addition to its employees, the Company relies on (i) distributors, agents, and third -party logistics providers in connection with product sales and distribution and (ii) raw material and component suppliers in the U.S., Europe, and China. If the Company, or any of these entities encounter any disruptions to its or their respective operations or facilities, or if the Company or any of these third -party partners were to shut down for any reason, including by fire, natural disaster, such as a hurricane, tornado or severe storm, power outage, systems failure, labor dispute, pandemic or other public health crises, or other unforeseen disruption, then the Company or they may be prevented or delayed from effectively operating its or their business, respectively. F- 7 NOTE C — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), and the applicable rules and regulations of the Securities and Exchange Commission (SEC) include the accounts of Milestone Scientific and its wholly owned and majority owned subsidiaries, including, Wand Dental (wholly owned), and Milestone Innovations Inc.(wholly owned). All significant, intra-entity transactions and balances have been eliminated in the consolidation. Ownership interests in consolidated entities that are held by entities other than us are reported as noncontrolling interests in our consolidated balance sheets. Losses attributed to noncontrolling interests are reported separately in our consolidated statements of operations. During December 2023, the Board of Directors of the Company approved a resolution to repurchase the remaining minority stake of Milestone Medical, Inc. for $ 214,000 . Concurrently, the Company transferred the net assets of Milestone medical, Inc. to a newly created, wholly-owned subsidiary, Milestone Innovations, Inc,. a Delaware corporation. 2. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to the inventory valuation, and cash flow assumptions going concern considerations. The Company bases its estimates on historical experience, known trends and other market-specific or relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known Actual results could differ from those estimates. 3. 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: i. identification of the promised goods or services in the contract; ii. determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; iii. measurement of the transaction price, including the constraint on variable consideration; iv. allocation of the transaction price to the performance obligations based on estimated selling prices; and v. recognition of revenue when (or as) the Company satisfies each performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. The Company derives its revenues from the sale of its products, primarily dental instruments, handpieces, and other related products. The Company sells its products directly to consumers in the United States and through a global distribution network 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 at a point in time, generally upon date of shipment. The Company has no obligation to 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. E-Commerce As of January 3, 2023, the Company launched an E-Commerce platform, selling and shipping STA Single Tooth Anesthesia Systems® (STA) and handpieces directly to dental offices and dental groups within the United States. Our E-commerce portal accepts online payments via credit and debit cards. The cost of delivery is charged to the customer along with appropriate sales tax. The Company recognizes revenue from product sales at the time the product ships to a customer via a third party carrier. F- 8 Sales Returns The Company records allowances for product returns as a reduction of revenue at the time product sales are recorded. Several factors are considered in determining whether an allowance for product returns is required, including the customers’ return rights and the Company’s historical experience with returns and the amount of product in the distribution channel not consumed by end users and subject to return. The Company relies on historical return rates to estimate returns. The Company terminated its major U.S. distributor contract as of December 31, 2022. That distributor had return rights in connection with this contract termination that extended through March 31, 2023. The Company recorded allowance of approximately $ 179,000 for those returns within its December 31, 2022 financial statements. As of December 31, 2023 no returns have been presented, and the Company reversed the allowance for sales returns. Financing and Payment The Company's payment terms differ by geography and customer, but payments from distributors are required within 90 days or less from the date of shipment. The E-commerce portal sells directly to end users and accepts online payments via credit and debit cards via a third -party. These payments from the third party are typically settled within two business days. Disaggregation of Revenue The Company operates in two operating segments: dental and medical. Therefore, the results of the Company's operations are reported on a consolidated basis for the purposes of segment reporting, consistent with internal management reporting. See Note M for revenues by geographical market, based on the customer’s location, and product category for the years ended December 31, 2023 and 2022 respectively. 5. Cash and Cash Equivalents Milestone Scientific considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2023 and 2022 Milestone Scientific has approximately $ 3.0 million and $ 8.7 million, respectively, in cash. As of December 31, 2023 and 2022 Milestone Scientific had cash that exceeded the Federal Deposit Insurance Corporation insurance limit of $250,000. 6. Marketable Securities The Company’s marketable securities are comprised of treasury bills with an original maturity greater than three months from date of purchase. The Company’s marketable securities are measured at fair value and are accounted for in accordance with ASU 2016 - 01. Unrealized holding gains and losses on treasury bills are recorded in interest income on the consolidated statements of operations. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of the marketable securities. The appropriate classification of marketable securities is determined at the time of purchase and evaluated as of each reporting balance sheet date. Investments in marketable debt and equity securities classified as available-for-sale are reported at fair value. Fair value is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Declines in the fair values of equity securities that are considered other-than-temporary, are charged to other income (expense), net. The Company considers available evidence in evaluating potential impairments of its investments, including the duration and extent to which fair value is less than cost. As of December 31, 2023 the Company held approximately $ 3.0 million in U.S. treasury securities, with maturity dates within 3 and 6 months. 7. Accounts Receivable Milestone Scientific sells a significant amount of its product on credit terms to its major distributors. Milestone Scientific estimates losses from the ability or inability of its customers to make payments on amounts billed. Most credit sales are due within 90 days from invoicing. There have not been any significant credit losses incurred to date. As of December 31, 2023 and 2022, accounts receivable was recorded, net of allowance for doubtful accounts of $ 10,000 . F- 9 9. Inventories Inventories principally consist of finished goods and component parts stated at the lower of cost ( first -in, first -out method) or net realizable value. Inventory quantities on hand are reviewed on a 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. 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. 10. Furniture, Fixture and Equipment Equipment is recorded at cost, less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. The costs of maintenance and repairs are charged to operations as incurred. 11. Intangible Assets – Patents and Developed Technology Patents are recorded at cost to prepare and file the applicable documents with the United States Patent Office, or internationally with the applicable governmental office in the respective country. The costs related to these patents are being amortized using the straight-line method over the estimated useful life of the patent. Patents and other developed technology acquired from another business entity are recorded at acquisition cost and be amortized at the estimated useful life. Patent defense costs, to the extent applicable, are expensed as incurred. 12. Impairment of Long-Lived Assets Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company’s impairment review process is based upon an estimate of future undiscounted cash flow. Factors the Company considers that could trigger an impairment review include the following: • significant under performance relative to expected historical or projected future operating results; • significant changes in the manner of our use of the acquired assets or the strategy for our overall business; • significant negative industry or economic trends; and • significant technological changes, which would render the technology obsolete. Recoverability of assets that will continue to be used in the Company's operations is measured by comparing the carrying value to the future net undiscounted cash flows expected to be generated by the asset or asset group. Future undiscounted cash flows include estimates of future revenues, driven by market growth rates, and estimated future costs. 13. Research and Development Research and development costs, which consist principally of new product development costs payable to third parties, are expensed as incurred. 14. Income Taxes Milestone Scientific accounts for income taxes under the asset and liability method which requires deferred tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. On December 31, 2023 and 2022, we had no uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Operations. No interest and penalties are present for periods open. Tax returns for the 2020, 2021, and 2022 years are subject to audit by federal and state jurisdictions. F- 10 15. Basic and Diluted Net Loss Per Common Share Milestone Scientific presents “basic ”loss per common share applicable to common stockholders and, if applicable, “diluted” loss per common share applicable to common stockholders pursuant to the provisions of ASC 260, “Earnings per Share”. Basic loss per common share is calculated by dividing net income or loss applicable to common stockholders by the weighted average number of common shares outstanding and to be issued common shares of 72,775,781 and 70,607,338 during the years ended December 31, 2023 and 2022, respectively. The calculation of diluted earnings per common share is like that of basic earnings per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of stock options and warrants were issued during the period. Since Milestone Scientific had net losses in the years ended December 31, 2023 and 2022, the assumed effects of the exercise of potentially dilutive outstanding stock options, unissued restricted stock awards (“RSA”) and warrants, were not included in the calculation as their effect would have been anti-dilutive. Such outstanding options, RSA and warrants 3,771,151 and 7,855,160 on December 31, 2023 and 2022, respectively. 16. Fair Value of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date (exit price). The Company required us to classify fair value measurements in one of the following categories. ● Level 1 inputs which are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. ● Level 2 inputs which are defined as inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly. ● Level 3 inputs are defined as unobservable inputs for the assets or liabilities. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of 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 December 31, 2023, the Company has the following assets that were measured at fair value on a recurring basis. Level 1 Level 2 Level 3 Total Marketable Securities December 31, 2023 $ 2,976,573 $ 2,976,573 Marketable Securities included US Treasury securities totaling $ 2,976,573 that are considered to be highly liquid and easily transferable at December 31, 2023. US Treasury securities are valued using inputs observable in active markets for identical securities and are therefore classified at Level 1 within the Company fair value hierarchy. The Company had no assets or liabilities that were measured at fair value on a recurring basis as of December 31, 2022. 17. Stock-Based Compensation Milestone Scientific accounts for stock-based compensation under ASC Topic 718, Share-Based Payment. ASC Topic 718 requires all share-based payments to employees, non-employees, directors, and officers, including grants of employee stock options, to be recognized in the consolidated statements of operations over the service period, as an operating expense, based on the grant-date fair values. The Company accounts for forfeitures as they occur. 18. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480” ) and ASC 815, Derivatives and Hedging (“ASC 815” ). F- 11 The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. Management concluded that its warrants qualify for equity accounting treatment. 19. Recent Accounting Pronouncements . Recently Issued Accounting Pronouncement In November 2023, FASB issued ASU 2023 - 07, Segment Reporting (Topic 280 ), Improvements to Reportable Segment Disclosures , which provides improvements to reportable segment disclosure requirements, primarily through enhanced disclosures around segment expenses. ASU 2023 - 07 requires us to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. ASU 2023 - 07 also requires that the Company disclose an amount for other segment items by reportable segment, a description of their composition and provide all annual disclosures about a reportable segment’s profit or loss and assets pursuant to Topic 280 during interim periods. The Company must also disclose the CODM’s title and position, as well as certain information around the measures used by the CODM and an explanation of how the CODM uses the reported measures in assessing segment performance and deciding how to allocate resources. For public entities with a single reportable segment, the entity must provide all the disclosures required pursuant to ASU 2023 - 07 and all existing segment disclosures under Topic 280. The amendments of ASU 2023 - 07 are effective for us for annual periods beginning January 1, 2024, and effective for interim periods beginning January 1, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company will evaluate the impact of ASU 2023 - 07 on our financial statements. In December 2023, FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures , to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023 - 09 provide improvements primarily related to the rate reconciliation and income taxes paid information included in income tax disclosures. The Company would be required to disclose additional information regarding reconciling items equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory tax rate. Similarly, the Company would be required to disclose income taxes paid (net of refunds received) equal to or greater than five percent of total income taxes paid (net of refunds received). Additionally, the Company would be required to disclose income (loss) from continuing operations before income tax expense disaggregated by foreign and domestic jurisdictions, as well as income tax expense disaggregated by federal, state, and foreign jurisdictions. The amendments in ASU 2023 - 09 are effective January 1, 2025, including interim periods. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company will evaluate the impact of ASU 2023 - 09 on our financial statements. Recently Adopted Accounting Pronouncement In June 2016, the FASB issued ASU 2016 - 13, Measurement of Credit Losses on Financial Instruments (“ASU 2016 - 13” ), which amends the guidance on measuring credit losses for certain financial assets measured at amortized cost, including trade receivables. The FASB has subsequently issued several updates to the standard, providing additional guidance on certain topics covered by the standard. This update requires entities to recognize an allowance for credit losses using a forward-looking expected loss impairment model, taking into consideration historical experience, current conditions, and supportable forecasts that impact collectability. As January 1, 2023, the Company adopted ASU 2016 - 13, Measurement of Credit Losses on Financial Instruments (“ASU 2016 - 13” ) the adoption of this ASU does not have a material impact on our financial statements. In November 2019, the FASB issued ASU 2019 - 10, Financial Instruments - Credit Losses (Topic, 326 ), Derivatives and hedging (Topic 815 ), and Leases (Topic 842 ): Effective dates , which deferred the effective date of ASU 2016 - 13 for the Company. As a result of ASU 2019 - 10, ASU 2016 - 13 is effective for all entities with fiscal years beginning after December 15, 2022, including interim periods. As of January 1, 2023, the Company adopted ASU 2019 - 10, Financial Instruments - Credit Losses (Topic, 326 ), Derivatives and hedging (Topic 815 ), and Leases (Topic 842 ) the adoption of this ASU does not have a material impact on our financial statements. F- 12 NOTE D — INVENTORIES December 31, 2023 December 31, 2022 Dental finished goods $ 2,404,970 $ 1,315,263 Medical finished goods 14,730 334,124 Component parts and other materials 218,486 142,948 Total inventories $ 2,638,186 $ 1,792,335 The Company has recorded an allowance on slow moving Medical finished goods due to the slow adoption of the epidural instruments and handpieces for approximately $ 258,000 and $ 582,000 as of December 31, 2023 and 2022, respectively. NOTE E — ADVANCES ON CONTRACTS The advances on contracts represent funding of future dental STA "Single Tooth Anesthesia System" and epidural inventory purchases and epidural replacements parts. The balance of the advances as of December 31, 2023 and 2022 was approximately $ 1.4 million and $ 1.3 million respectively . NOTE F — FURNITURE, FIXTURES AND EQUIPMENT December 31, 2023 December 31, 2022 Leasehold improvements $ 24,734 $ 24,734 Office furniture and equipment 181,745 178,058 Molds 7,200 7,200 Trade show displays 151,462 151,462 Computers and software 281,256 280,066 Tooling Safety Wand 125,022 125,022 Tooling equipment-STA & Wand 11,100 11,100 EPI and IA Instruments 82,363 82,363 STA Trials Instruments $ 63,752 63,752 Total 928,634 923,757 Less accumulated depreciation ( 918,610 ) ( 905,611 ) Total $ 10,024 $ 18,146 Depreciation expenses was $ 12,999 and $ 14,180 for the years ended December 31, 2023, and 2022, respectively. NOTE G — INTANGIBLES, NET December 31, 2023 Cost Accumulated Amortization Net Patents-foundation intellectual property $ 1,377,863 $ ( 1,199,227 ) $ 178,636 Total $ 1,377,863 $ ( 1,199,227 ) $ 178,636 December 31, 2022 Cost Accumulated Amortization Net Patents-foundation intellectual property $ 1,377,863 $ ( 1,149,907 ) $ 227,956 Total $ 1,377,863 $ ( 1,149,907 ) $ 227,956 Patents are amortized utilizing the straight-line method over estimated useful lives ranging from 3 to 20 years. Amortization expense was approximately $ 49,000 and $ 50,000 for the years ended December 31, 2023 and 2022, respectively. The annual amortization expense expected to be recorded for existing intangibles assets for the years 2024 through 2027 is approximately $ 34,000 , $ 28,000 , $ 28,000 and $ 86,000 , respectively. F- 13 NOTE H — STOCKHOLDERS ’ EQUITY PUBLIC OFFERING On December 10, 2023, the Company completed a public offering for sale of 4,765,000 common stock, at $ 0.63 per share which generated net proceeds of approximately $ 2.6 million. In addition, the Company granted the Underwriter a 45 -day option to purchase up to an additional 714,750 shares of Common Stock at the same price to cover over-allotments. Refer to subsequent event note Q. NONCONTROLLING INTEREST During December 2023, the Board of Directors of the Company approved a resolution to merge Milestone Medical, Inc. with and into a newly created, wholly owned subsidiary, Milestone Innovations, Inc., a Delaware corporation, with Milestone Innovations, Inc. as the surviving entity. As a result of such merger, the public stockholders are entitled to receive for their shares traded on the Warsaw Stock Exchange an aggregate of approximately $ 214,000 , and Milestone Medical, Inc. has been de-listed, no longer requiring reports and other filings in Poland. The Company accounted for the transaction as a transfer between entities under common control pursuant to ASC 805, Business Combinations ("ASC 805" ). Due to the nature of the transaction, the Company did not remeasure the transferred assets at fair value but recorded them at their carrying basis at the time of transfer pursuant to ASC 805. As the Company was acquiring an additional interest in Milestone Medical, the Company accounted for the transaction as a capital transaction pursuant to ASC 810, Consolidation , as the Company retained control of both Milestone Medical, Inc. and Milestone, Innovations, Inc prior to and subsequent to the transaction. As of December 31, 2023, the Company recorded a liability due to the minority shareholder of Milestone Medical. The Company recorded a charge to additional paid in capital of approximately $ 485,000 which includes the reclassification of accumulated deficit attributed to the non-controlling interest on the date of the transaction and payable to non-controlling interest holders as a result of this transaction. WARRANTS The following table summarizes information about shares issuable under warrants outstanding on December 31, 2023: Warrant shares outstanding Weighted Average exercise price Weighted Average remaining life Intrinsic value Outstanding at January 1, 2023 4,268,221 2.18 0.50 - Issued - - - - Exercised - - - - Expired or cancelled ( 3,953,649 ) - - - Outstanding and exercisable at December 31,2023 314,572 0.50 0.10 59,737 SHARES TO BE ISSUED As of December 31, 2023 and 2022, there were 2,571,292 and 2,057,976 , respectively shares to be issued whose issuance has been deferred under the terms of an employment agreements with the former Interim Chief Executive Officer, former Chief Financial Officer, and other employees of Milestone Scientific. Such shares will be issued to each party upon termination of their employment. As of December 31, 2023 and 2022, there were 527,625 and 382,697 respectively shares to be issued to non-employees, 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 on December 31, 2023 and 2022. 2023 2022 Shares-to-be-issued, outstanding January 1, respectively 2,440,673 2,066,343 Granted in current period 658,244 524,814 Issued in current period - ( 150,484 ) Shares-to be issued outstanding December 31, respectively 3,098,917 2,440,673 F- 14 NOTE I — STOCK OPTION PLANS The Milestone Scientific Inc., Amended and Restated 2020 Equity Incentive Plan, provides for awards of restricted common, stock restricted stock units, options to purchase and other awards. On June 28, 2023 the plan was amended and restated (the "2020 Plan") the maximum 4,000,000 common stock share was increased to 11,500,000 shares of common stock. The plan expires in June 2031. Options may be granted to employees, directors, and consultants of Milestone Scientific for the purchase of shares of common stock at a price not less than the fair market value of common stock on the date of grant. Generally, options become exercisable over a three -year period from the grant date and expire five years after the date of grant. As of December 31, 2023 and 2022, the Company had 9,174,520 and 323,190 , respectively, remaining options available for grants under the Plan. Milestone Scientific recognizes compensation expenses over the requisite service period and in the case of performance-based options over the period of the expected performance. For the years ended December 31, 2023 and 2022, Milestone Scientific recognized approximately $ 0.9 million and $ 1.0 million of total employee compensation cost, respectively, recorded in general and administrative expenses on the statement of operations. As of December 31, 2023, there was $ 1.5 million of total unrecognized compensation cost related to non-vested options. Milestone Scientific expects to recognize these costs over a weighted average period of 2.3 years. A summary of option activity for employees under the plans and changes the year ended December 31, 2023 is presented below: Number of Options Weighted Averaged Exercise Price $ Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Options Value $ Options outstanding January 1, 2023 3,059,989 2.36 6.38 - Granted during 2023 - - - - Exercised during 2023 - - - - Forfeited or expired during 2023 ( 23,000 ) - - - Options outstanding December 31, 2023 3,036,989 2.29 5.41 - Exercisable, December 31, 2023 1,732,084 2.21 4.34 - There were no options granted to employees during the year ended December 31, 2023. A summary of option activity for non-employees under the plans and changes during the year ended December 31, 2023 is presented below: Number of Options Weighted Averaged Exercise Price $ Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Options Value $ Options outstanding January 1, 2023 91,663 1.75 2.55 1,083 Granted during 2023 8,333 0.89 4.21 - Exercised during 2023 ( 8,333 ) 0.75 - - Options outstanding December 31, 2023 91,663 1.76 2.25 2,833 Exercisable, December 31, 2023 83,332 1.86 1.79 2,833 F- 15 The fair value of the non-employee options was estimated on the date of grant using the Black Scholes option-pricing model at the date of grant. For the years ended December 31, 2023 and 2022, Milestone Scientific recognized approximately $ 19,700 and $ 22,900 expense related to non-employee options, respectively. A summary of restricted stock under the plans and changes during the year ended December 31, 2023 is presented below: Number of Shares Weighted Average Grant-Date Fair Value per Award Non-vested as January 1, 2023 435,293 1.18 Granted 617,978 0.89 Vested ( 694,658 ) - Cancelled ( 30,676 ) - Non-vested as December 31, 2023 327,937 0.91 As of December 31, 2023, there were 18,947 restricted shares granted and deferred under the terms of an employment agreement with the Territory Manager of Milestone Scientific. Such shares will be issued to each party upon completion of 2 years of employment. For the years ended December 31, 2023 and 2022, the Company recognized negative stock compensation expense of approximately ($ 15,000 ) and $( 20,000 ), respectively. As of December 31, 2023, the total unrecognized compensation expense was $ 2,000 related to unvested restricted stock awards for Territory Managers, which the Company expects to recognize over an estimated weighted-average period of 0.21 years. As of December 31, 2023, the Company entered into restricted stock agreements with members of the Board of Directors of the Company. The Company granted 617,978 restricted stock awards with a fair market value of $ 0.89 per share. Such restricted stock vests as follows: 25 % on the grant date in June 2023, and 25 % quarterly, on the first day of the following months: October 2023, January 2024, and April 2024. These awards vest immediately upon a change of control as defined in the agreements. For the year ended December 31, 2023, the Company recognized approximately $ 576,000 for restricted stock expenses recorded in general and administrative expenses on the statement of operation. As of December 31, 2023, the total unrecognized stock compensation expense was approximately $ 132,000 related to non-vested restricted stock awards with the members of the Board of Directors, which the Company expects to recognize over an estimated weighted average period of 0.25 years. NOTE J – EMPLOYMENT CONTRACT AND CONSULTING AGREEMENTS Consulting Agreements K. Tucker Andersen, a significant stockholder of Milestone Scientific, has an agreement with Milestone Scientific to provide financial and business strategic services. Expenses recognized on this agreement were $ 100,000 for years ended December 31, 2023 and 2022, respectively. The Director of Clinical Affairs’ royalty fee was approximately $ 485,000 and $ 442,000 for the years ended December 31, 2023 and 2022, respectively. Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of $ 156,000 and $ 154,000 for the year ended December 31, 2023 and 2022, respectively. As of December 31, 2023, and 2022, Milestone Scientific owed the Director Clinical Affairs for royalties of approximately $ 114,000 and $ 120,000 , respectively, which is included in accounts payable, related party and accrued expense, related party, in the consolidated balance sheet. Employment Contracts On March 2, 2021, the Company entered into a Royalty Sharing Agreement with Leonard Osser, pursuant to which Mr. Osser sold, transferred and assigned to the Company all of his rights in and to a certain patent application as to which he is a co-inventor with Mark Hochman, a consultant to the Company, and the Company agreed to pay to Mr. Osser, beginning May 9, 2027, half of the royalty ( 2.5 %) on net sales that would otherwise be payable to Mark and Claudia Hochman under their existing Technology Sale Agreement, dated January 1, 2005 and amended from time to time, with the Company. In connection with the Royalty Sharing Agreement, the Hochman's agreed with the Company, pursuant to an addendum to such Technology Sale Agreement dated February 25, 2021, to reduce from 5 % to 2.5 % the payments due to them under their Technology Sale Agreement beginning on May 9, 2027, and thereafter with respect to dental products embodying the invention. F- 16 As part of the Succession Plan of the Company, Mr. Osser agreed, pursuant to an agreement dated April 6, 2021 ( the “Succession Agreement”), to restructure certain of his existing agreements with the Company, which provide for additional and broader executive support, and at such time as he elects to step down as Interim Chief Executive Officer of the Company, to become the Vice Chairman of the Board of the Company. With respect to Mr. Osser’s July 2017 Employment Agreement and July 2017 Consulting Agreement (each as previously disclosed), the compensation under the Employment Agreement was modified to reduce the overall compensation by $ 100,000 to $ 200,000 , split equally between a cash amount and an amount in shares, and the compensation under the Consulting Agreement was increased by $ 100,000 to $ 200,000 , equally split between a cash amount and an amount in shares, which shares were formerly payable under the Employment Agreement. If the Company terminates Mr. Osser’s employment “Without Cause,” other than due to his death or disability, or if Mr. Osser terminates his employment for “Good Reason” (both as defined in the agreement), Mr. Osser is entitled to be paid in one lump sum payment as soon as practicable following such termination: an amount equal to the aggregate present value (as determined in accordance with Section 280G (d)( 4 ) of the Code) of all compensation pursuant to this agreement from the effective date of termination hereunder through the remainder of the Employment Term. In connection with his acceptance of the Vice Chairman position and in consideration of his services as a member of the Board and agreement to provide certain additional general consulting services, Mr. Osser was granted options to purchase 2,000,000 shares of common stock, exercisable at the fair market value of the common stock on the date of grant, vesting over the five -year period after he steps down as Interim Chief Executive Officer of the Company or ten years from the date of grant, whichever shall end first. The Company believes that the effect of such existing agreements and the Succession Agreement, all of which relate to the period after such time Mr. Osser steps down as Interim Chief Executive Officer of the Company, collectively expand Mr. Osser’s consulting to and support of the Company beyond its Chinese operations to also include its medical and other products, while enhancing the retention aspects of the Company’s relationship with Mr. Osser. On May 19, 2021, Mr. Osser resigned as Interim Chief Executive Officer of the Company and assumed the role of Vice Chairman of the Board. Compensation under the Employment Agreement and the Consulting Agreement is payable for 9.5 years from May 19, 2021. The Company recorded expenses of $ 200,000 related to the Employment Agreement for each of the years ended December 31, 2023 and 2022, respectively. The Company recorded expenses of $ 200,000 related to the Consulting Agreement for each of the years ended December 31, 2023 and 2022, respectively. On January 1, 2022, the Company entered into an employment agreement with Mr. Arjan Haverhals. The employment term ends December 31, 2024, unless extended by mutual written agreement. Mr. Haverhals will serve as the President and Chief Executive Officer of the Company and such other senior executive positions as accepted and determined by the Board reasonably requests. As an executive, notwithstanding the fact that he is a director, Mr. Haverhals has board observer rights. The agreement calls for a base salary of $ 350,000 and bonus compensation of up to $ 400,000 per year, comprise of three separate performance based bonuses each up to $ 100,000 per year, based upon the Company’s achievement of three ( 3 ) performance or financial goals, as established by the Compensation Committee in its reasonable discretion; and (ii) a discretionary bonus up to $ 100,000 , as determined by the Compensation Committee, in its sole discretion. Satisfaction of bonus goals will be determined by the Compensation Committee from time to time in its reasonable discretion. Bonus compensation, if any, shall be payable annually in arrears thirty-three percent ( 33 %) in cash and sixty-seven percent ( 67 %) in shares of the Company’s common stock. Mr. Haverhals will also be entitled to reimbursement of expenses, four weeks’ paid vacation, a car allowance and participation in company retirement plans and health insurance reimbursement. The agreement provides for the typical termination provisions. If Mr. Haverhals is terminated for other than for cause or termination by him for good reason, he will be paid as severance, his base compensation, and certain other benefits, as provided in the employment agreement, for two years after termination. NOTE K — INCOME TAXES Milestone Scientific accounts for income taxes under the asset and liability method which requires deferred tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. At December 31, 2023 and 2022, we had no uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Operations. No interest and penalties are present for periods open. Tax returns for the 2020, 2021, and 2022 years are subject to audit by federal and state jurisdictions. Due to Milestone Scientific's history of operating losses, a full valuation allowances have been provided for all of Milestone Scientific's deferred tax assets. At December 31, 2023 and 2022, no recognition was given to the utilization of the remaining net operating loss carry forwards in each of these periods. F- 17 Deferred tax attributes resulting from differences between financial accounting amounts and tax bases of assets and liabilities at December 31, 2023 and 2022 are as follows: 2023 2022 Allowance for Doubtful Accounts 2,000 $ 2,000 Warranty Reserve - 2,000 Impaired Assets - - Capitalized Sec. 174 R&D 344,000 242,000 Inventory Reserve 300,000 242,000 Deferred Officer's Compensation 689,000 428,000 Depreciation and Amortization ( 44,000 ) ( 56,000 ) Right of Use Asset ( 86,000 ) ( 108,000 ) Lease Liability 93,000 116,000 Net Operating Loss Carryforwards 19,920,000 19,315,000 Tax Credits 558,000 688,000 Other 302,000 147,000 Subtotal 22,080,000 21,018,000 Valuation allowance ( 22,080,000 ) ( 21,018,000 ) Non-current deferred tax asset - - As of December 31, 2023 and 2022, federal net operating loss carry-forwards are approximately $ 74,500,000 and $ 71,700,000 , respectively. As of December 31, 2023, Milestone Scientific has $ 38,100,000 net operating losses generated before December 31, 2017 that will be available to offset future income, if any, through December 2037. Additionally, as of December 31, 2023, Milestone Scientific has $ 36,400,000 of net operating losses generated in 2018 or after that can be carried forward indefinitely. State net operating losses were approximately $ 63,300,000 and $ 60,500,000 for the periods ended December 31, 2023 and 2022, respectively. Net operating losses will be available to offset future taxable income, if any, through December 2041. The utilization of Milestone Scientific's net operating losses may be subject to a substantial limitation due to the "change of ownership provisions" under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carry forwards before their utilization. Milestone Scientific has established a 100 % valuation allowance for all of its deferred tax assets due to uncertainty as to their future realization. Accounting for uncertainties in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure, and transition. No interest and penalties are present for periods open. Tax returns for the 2020, 2021, and 2022 years are subject to audit by federal and state jurisdictions. A reconciliation of the statutory tax rates for the years ended December 31, is as follows: 2023 2022 Statutory Rate 21.00 % 21.00 % State income tax - all states 0.88 % - 2.74 % Stock compensation 0.58 % - 2.57 % NOL Expiration - 5.05 % - 4.69 % Return to Provision - 2.21 % 0.00 % Other 0.03 % - 0.56 % Subtotal 15.23 % 10.44 % Valuation Allowance - 15.23 % - 10.44 % Effective tax Rate 0.00 % 0.00 % F- 18 NOTE L — SEGMENT AND GEOGRAPHIC DATA The Company conducts its business through two reportable segments: Dental and Medical. 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: Year ended December 31, Sales Net Sales: 2023 2022 Dental $ 9,761,444 $ 8,753,156 Medical 66,000 52,750 Total net sales $ 9,827,444 $ 8,805,906 Operating Income (Loss): 2023 2022 Dental $ 2,128,199 $ 1,121,815 Medical ( 3,708,170 ) ( 4,788,105 ) Corporate ( 5,526,503 ) ( 5,161,183 ) Total operating loss $ ( 7,106,474 ) $ ( 8,827,473 ) Depreciation and Amortization: 2023 2022 Dental $ 4,243 $ 3,805 Medical 2,787 4,075 Corporate 54,882 55,875 Total depreciation and amortization $ 61,912 $ 63,755 Income (loss) before taxes and equity in earnings of affiliates: 2023 2022 Dental $ 2,127,659 $ 1,116,598 Medical ( 3,708,170 ) ( 4,794,089 ) Corporate ( 5,400,436 ) ( 5,095,375 ) Total loss before taxes and equity in earnings of affiliate $ ( 6,980,947 ) $ ( 8,772,866 ) Total Assets December 31, 2023 December 31, 2022 Dental $ 4,866,786 $ 3,875,978 Medical 345,194 620,373 Corporate 6,159,532 9,205,735 Total assets $ 11,371,512 $ 13,702,086 F- 19 The following table presents information about our operations by geographic area as of December 31, 2023 and 2022. Net sales by geographic area are based on the respective locations of our subsidiaries. 2023 Domestic: US Dental Medical Grand Total Instruments $ 1,002,697 $ 1,000 $ 1,003,697 Handpieces 4,270,898 12,000 4,282,898 Accessories 75,285 - 75,285 Grand Total $ 5,348,880 $ 13,000 $ 5,361,880 International: Rest of World Instruments $ 1,251,354 $ 25,000 $ 1,276,354 Handpieces 2,845,734 28,000 2,873,734 Accessories 45,476 - 45,476 Grand Total $ 4,142,564 $ 53,000 $ 4,195,564 International: China Instruments $ 270,000 $ - $ 270,000 Handpieces - - - Accessories - - - Grand Total $ 270,000 $ - $ 270,000 Total Product Sales $ 9,761,444 $ 66,000 $ 9,827,444 2022 Domestic: US Dental Medical Grand Total Instruments $ 524,715 $ 7,500 $ 532,215 Handpieces 2,653,914 25,250 2,679,164 Accessories 78,493 78,493 Grand Total $ 3,257,122 $ 32,750 $ 3,289,872 International: Rest of World Instruments $ 1,413,525 $ - $ 1,413,525 Handpieces 3,391,748 20,000 3,411,748 Accessories 60,797 - 60,797 Grand Total $ 4,866,070 $ 20,000 $ 4,886,070 International: China Instruments $ 270,000 $ - $ 270,000 Handpieces 359,964 - 359,964 Accessories - - - Grand Total $ 629,964 $ - $ 629,964 Total Product Sales $ 8,753,156 $ 52,750 $ 8,805,906 NOTE M-- CONCENTRATION Milestone Scientific has informal arrangements with third -party U.S. manufacturers of the STA, CompuDent and CompuMed devices, pursuant to which they manufacture these products under specific purchase orders but without any long-term contract or minimum purchase commitment. Consequently, advances on contracts have been classified as current on December 31, 2023 and 2022. 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. Although alternate sources of supply exist, and new manufacturing relationships could be established, Milestone Scientific would need to recover its existing tools or have new tools produced. Establishment of new manufacturing relationships could involve significant expense and delay. Any curtailment or interruption of the supply, because of termination of such a relationship, would have a material adverse effect on Milestone Scientific’s financial condition, business, and results of operations. F- 20 On January 3, 2023, the Company launched an E-Commerce platform selling and shipping STA Single Tooth Anesthesia System® (STA) and handpieces directly to dental offices and dental groups within the U.S. For the year ended December 31,2023, E-Commerce accounted for 48 % of net product. The Company had two distributors that accounted for 32 %, and 11 % amount of revenue respectively for the year ended December 31, 2022. We had three distributors that accounted for 39 %, 38 %, and 15 % of accounts receivable, respectively, year ended December 31, 2023. We had two customers that accounted for 33 %, and 20 % of accounts receivable, respectively as of December 31, 2022. As of December 31, 2023 we had three vendors that accounted for 37 %, and 17 % and 12 %, respectively, of accounts payable and accounts payable related party. We had one vendor that accounted for 42 % of accounts payable and accounts payable related party as of December 31, 2022. NOTE N -- RELATED PARTY TRANSACTIONS United Systems Milestone Scientific has a supply agreement with United Systems (whose controlling shareholder, Tom Cheng, is a significant stockholder of Milestone Scientific), the principal supplier of its handpieces, pursuant to which it procures manufactured products under specific purchase orders, but without minimum purchase commitments. Purchases from this supplier were approximately 2.3 million and $ 3.4 million for the twelve months ended December 31, 2023, and 2022, respectively. As December 31, 2023, and December 31, 2022, Milestone Scientific owed this supplier approximately $ 402,000 and $ 819,000 , respectively, which is included in accounts payable and accrued expenses related party on the consolidated balance sheets. In June 2021, the Company signed a ten -year agreement with United Systems for supplier of the handpieces. Other In December 31, 2023 and 2022 the Company had approximately $ 270,000 and $ 630,000 sales to Milestone China or agents of Milestone China, an entity in which the Company formerly had an ownership interest terminating in 2021. K. Tucker Andersen, a significant stockholder of Milestone Scientific, has an agreement with Milestone Scientific to provide financial and business strategic services. Expenses recognized on this agreement were $ 100,000 for years ended December 31, 2023 and 2022, respectively. Director of Clinical Affairs The Director of Clinical Affairs’ royalty fee was approximately $ 485,000 and $ 442,000 for the years ended December 31, 2023 and 2022, respectively. Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of $ 156,000 and $ 154,000 for the year ended December 31, 2023 and 2022, respectively. As of December 31, 2023, and 2022, Milestone Scientific owed the Director Clinical Affairs for royalties of approximately $ 114,000 and $ 120,000 , respectively, which is included in accounts payable, related party and accrued expense, related party, in the consolidated balance sheet. Director On March 2, 2021, the Company entered into a Royalty Sharing Agreement with Leonard Osser, pursuant to which Mr. Osser sold, transferred and assigned to the Company all of his rights in and to a certain patent application as to which he is a co-inventor with Mark Hochman, a consultant to the Company, and the Company agreed to pay to Mr. Osser, beginning May 9, 2027, half of the royalty ( 2.5 %) on net sales that would otherwise be payable to Mark and Claudia Hochman under their existing Technology Sale Agreement, dated January 1, 2005 and amended from time to time, with the Company. In connection with the Royalty Sharing Agreement, the Hochman's agreed with the Company, pursuant to an addendum to such Technology Sale Agreement dated February 25, 2021, to reduce from 5 % to 2.5 % the payments due to them under their Technology Sale Agreement beginning on May 9, 2027, and thereafter with respect to dental products embodying the invention. As part of the Succession Plan of the Company, Mr. Osser agreed, pursuant to an agreement dated April 6, 2021 ( the “Succession Agreement”), to restructure certain of his existing agreements with the Company, which provide for additional and broader executive support, and at such time as he elects to step down as Interim Chief Executive Officer of the Company, to become the Vice Chairman of the Board of the Company. F- 21 With respect to Mr. Osser’s July 2017 Employment Agreement and July 2017 Consulting Agreement (each as previously disclosed), the compensation under the Employment Agreement was modified to reduce the overall compensation by $ 100,000 to $ 200,000 , split equally between a cash amount and an amount in shares, and the compensation under the Consulting Agreement was increased by $ 100,000 to $ 200,000 , equally split between a cash amount and an amount in shares, which shares were formerly payable under the Employment Agreement. If the Company terminates Mr. Osser’s employment “Without Cause,” other than due to his death or disability, or if Mr. Osser terminates his employment for “Good Reason” (both as defined in the agreement), Mr. Osser is entitled to be paid in one lump sum payment as soon as practicable following such termination: an amount equal to the aggregate present value (as determined in accordance with Section 280G (d)( 4 ) of the Code) of all compensation pursuant to this agreement from the effective date of termination hereunder through the remainder of the Employment Term. In connection with his acceptance of the Vice Chairman position and in consideration of his services as a member of the Board and agreement to provide certain additional general consulting services, Mr. Osser was granted options to purchase 2,000,000 shares of common stock, exercisable at the fair market value of the common stock on the date of grant, vesting over the five -year period after he steps down as Interim Chief Executive Officer of the Company or ten years from the date of grant, whichever shall end first. The Company believes that the effect of such existing agreements and the Succession Agreement, all of which relate to the period after such time Mr. Osser steps down as Interim Chief Executive Officer of the Company, collectively expand Mr. Osser’s consulting to and support of the Company beyond its Chinese operations to also include its medical and other products, while enhancing the retention aspects of the Company’s relationship with Mr. Osser. On May 19, 2021, Mr. Osser resigned as Interim Chief Executive Officer of the Company and assumed the role of Vice Chairman of the Board. Compensation under the Employment Agreement and the Consulting Agreement is payable for 9.5 years from May 19, 2021. The Company recorded expenses of $ 200,000 related to the Employment Agreement for each of the years ended December 31, 2023 and 2022, respectively. The Company recorded expenses of $ 200,000 related to the Consulting Agreement for each of the years ended December 31, 2023 and 2022, respectively. NOTE O — COMMITMENTS ( 1 ) Contract Manufacturing Agreement Milestone Scientific has informal arrangements with third -party manufacturers of the STA, CompuDent® and CompuMed® devices, pursuant to which they manufacture these products under specific purchase orders but without any long-term contract or minimum purchase commitment. The company entered into a new purchase commitment for the delivery of 2,200 STA CompuDent® instruments. As of December 31, 2023, the purchase order commitment was approximately $ 2.3 million, and approximately $ 1.3 million was paid and reported in advance on contracts in the consolidated balance sheet. As of December 31, 2022, the purchase order commitment was approximately $ 1.7 million, and approximately $ 1.2 million was paid and reported in advance on contracts in the consolidated balance sheet. As of December 31, 2023 and 2022 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 of approximately $ 76,000 , respectively. ( 2 ) Leases Operating Leases In August 2019, the Company made the decision to not renew its existing office lease for its corporate headquarters located in Livingston, New Jersey and instead signed a new seven -year lease in a new facility located in Roseland, New Jersey (the “Roseland Facility”), which commenced of January 8, 2021. Under the Roseland Facility lease, rent payments commence on April 1, 2021, and the monthly lease payments escalate annually on January 1 of each year, and range from $ 9,275 to $ 10,898 per month over the lease term. The Company is also required to pay a fixed electric charge equal to $ 2.00 per square foot which is paid in equal monthly installments over the lease term or $ 11,130 annually. These fixed monthly payments have been included in the measurement of the operating lease liability and related operating lease right-of-use asset as the Company has elected the practical expedient to not separate lease and non-lease components for all leases. The Company is also required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises more than new base year amounts, which are accounted for as variable lease expenses. As of December 31, 2023, total finance right-of-use assets were $ 8,998 and total finance liabilities were $ 10,698 of which $ 10,264 and $ 434 . were classified as current and non-current, respectively. As of December 31, 2023 total operating right-of use assets were $ 355,235 and total operating lease liabilities were $ 385,280 , of which $ 103,427 and $ 281,853 were classified as current and non-current, respectively. As of December 31, 2022, total finance right-of-use assets were $ 17,645 and total finance liabilities were $ 20,063 of which $ 9,365 and $ 10,698 were classified as current and non-current, respectively. As of December 31, 2022, total operating right-of use assets were $ 443,685 and total operating lease liabilities were $ 476,980 , of which $ 91,701 and $ 385,279 were classified as current and non-current, respectively. F- 22 The Company identified and assessed the following significant assumptions in recognizing its right-of-use assets and corresponding lease liabilities: ● As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company has utilized its incremental borrowing rate based on the long-term borrowing costs of comparable companies in the Medical Device industry. ● Since the Company elected to account for each lease component and its associated non-lease components as a single combined lease component, all contract consideration was allocated to the combined lease component. ● The expected lease terms include non-cancellable lease periods. Renewal option periods are not included in the determination of the lease terms as they were not reasonably certain to be exercised. The components of lease expense were as follows: December 31, 2023 December 31, 2022 Cash paid for operating lease liabilities $ 127,526 $ 127,995 Cash paid for finance lease liabilities 10,740 10,740 Right-of-use assets obtained in exchange for new operating lease liabilities (1) Property and equipment obtained in exchange for new finance lease liabilities Weighted Average Remaining Lease Term Finance leases (years) 1.04 years 2.04 years Operating leases (years) 3.25 years 4.25 years Weighted-average discount rate – operating leases Weighted-average discount rate – finance leases Maturity of lease liabilities as December 31, 2023 Operating Lease Finance Lease 2024 133,560 10,740 2025 136,343 433 2026 139,125 - 2027 35,477 - Less: Interest 444,505 11,173 Present Value of lease liabilities ( 59,225 ) ( 475 ) 385,280 10,698 F- 23 NOTE P — BENEFIT PLAN Milestone Scientific has a Defined Contribution Plan that allows eligible employees to contribute part of their salary through payroll deductions. Milestone Scientific does not contribute to this plan, but does pay the administrative costs of the plan, which were not significant. NOTE Q — SUBSEQUENT EVENTS In Connection with the Company's capital raise on December 10, 2023, on January 12, 2024 the underwriter exercised its over-allotment option as to 372,110 shares of common stock for net proceeds after discounts and commission of $ 216,847 . Since the year ended December 31, 2023, the Company issued 103,500 shares of common stock for warrants exercised at $ 0.50 for proceeds of $ 51,647 . F-24