10-Q: Milestone Scientific Reports Q2 Loss, Raises Capital Amid Going Concern Doubt

Milestone Scientific reported a net loss of $1.48 million for Q2 2025 and $3.48 million for the six months, with a significant decrease in cash and a going concern warning, despite increased product sales.

Summary

• Net loss for the three months ended June 30, 2025, was $1,483,110, compared to a net income of $223,638 for the same period in 2024.
• Net loss for the six months ended June 30, 2025, was $3,477,696, compared to a net loss of $1,216,891 for the same period in 2024.
• Product sales increased by 25.3% to $2.32 million for Q2 2025 and by 11.0% to $4.56 million for the six months ended June 30, 2025, compared to the respective prior year periods.
• Gross profit increased by 14.6% to $1.62 million for Q2 2025 and by 5.8% to $3.27 million for the six months ended June 30, 2025.
• Cash and cash equivalents decreased significantly from $3.26 million at December 31, 2024, to $1.27 million at June 30, 2025.
• The company reported substantial doubt about its ability to continue as a going concern for the next year due to recurring losses and the need for additional capital.
• Research and development expenses decreased by 83.6% in Q2 2025 due to a decision to delay development of the next-generation STA Single Tooth Anesthesia System.
• Milestone Scientific issued $800,000 in convertible notes to related parties in April 2025 to support operations.
• Eric Hines was appointed President and Chief Executive Officer, and a director, effective July 31, 2025.

Sentiment

Score: 3

Explanation: Despite increases in product sales and gross profit, the company faces severe liquidity issues, a substantial net loss, and a going concern warning. The delay in R&D for a next-gen product and heavy reliance on related-party financing indicate significant operational and financial distress.

Positives

• Product sales increased by 25.3% to $2.32 million for the three months ended June 30, 2025, and by 11.0% to $4.56 million for the six months ended June 30, 2025, compared to the prior year periods.
• Gross profit increased by 14.6% to $1.62 million for the three months and by 5.8% to $3.27 million for the six months ended June 30, 2025.
• Loss from operations improved by $295,792 for the three months ended June 30, 2025, compared to the same period in 2024.
• International revenue increased by $511,000 to $1.0 million for the three months ended June 30, 2025, and by $500,000 to $1.9 million for the six months ended June 30, 2025.
• Sales in China, which were zero in the prior year, contributed $110,000 in revenue for the six months ended June 30, 2025.
• Medical revenue increased by $13,000 to $32,000 for the three months and by $57,000 to $83,000 for the six months ended June 30, 2025.

Negatives

• Net loss significantly worsened to $1,483,110 for Q2 2025 from a net income of $223,638 in Q2 2024, primarily due to the absence of a $1.98 million gain from the sale of net operating losses in the prior year.
• Net loss for the six months ended June 30, 2025, increased to $3,477,696 from $1,216,891 in the prior year, also impacted by the absence of the NOL sale gain.
• Cash and cash equivalents decreased by $1,983,744, from $3,258,058 at December 31, 2024, to $1,274,314 at June 30, 2025.
• Net cash used in operating activities increased significantly to $2,772,273 for the six months ended June 30, 2025, compared to $434,473 for the same period in 2024, indicating a higher cash burn rate.
• The company has an accumulated deficit of $131.5 million since inception.
• Working capital decreased from $5.54 million at December 31, 2024, to $3.86 million at June 30, 2025.
• The company has concluded there is substantial doubt about its ability to continue as a going concern for a period of one year.

Risks

• Substantial doubt about the company's ability to continue as a going concern for a period of one year due to recurring losses, accumulated deficit, and the need for additional capital.
• Inability to raise additional capital on acceptable terms, or at all, which may force delays, curtailment, or elimination of commercialization efforts for the CompuFlo Epidural System.
• Raising additional funds by issuing securities or through licensing/lending arrangements may cause dilution to existing stockholders, restrict operations, or require relinquishing proprietary rights.
• If physicians do not accept or use the CompuFlo Epidural Computer Controlled Anesthesia System, the ability to generate revenue from sales will be materially impaired.
• Reliance on two third parties to manufacture products, with informal arrangements and no long-term contracts or minimum purchase commitments, exposes the company to risks of supply interruption and significant expense/delay in establishing new relationships.
• Changes in informal manufacturing arrangements and disruptions at manufacturing facilities, including shortages or delays in obtaining chips and other components, may harm the business.
• Changes to distribution arrangements expose the company to risks of interruption of marketing efforts and challenges in building new marketing channels.
• Exposure to risks inherent in international sales and operations, including in China, and the changing tariff and trade policies of the United States and China.
• Developments by competitors may render products or technologies obsolete or non-competitive.
• Potential liability to pay the state of New Jersey up to $2.2 million if the company does not retain a physical presence in the state for 5 years after the sale of net operating losses.
• Customer concentration risk, with E-Commerce accounting for 53% of net product sales for Q2 2025, and three distributors accounting for 32%, 16%, and 13% of accounts receivable as of June 30, 2025.
• Supplier concentration risk, with four suppliers accounting for 25%, 24%, 12%, and 11% of accounts payable and related party accounts payable as of June 30, 2025.

Future Outlook

Management intends to pursue additional funding through equity or debt financings to support its current operating plan and actively seeks to generate positive cash flows from operating activities by increasing revenue from its dental and medical businesses worldwide and reducing operating expenses. The company aims to establish its DPS Dynamic Pressure Sensing technology platform as the standard-of-care and continue to expand its global footprint for the CompuFlo Epidural and CathCheck System.

Management Comments

• Milestone Scientific wishes to ensure that such statements are accompanied by meaningful cautionary statements pursuant to the safe harbor established in the Private Securities Litigation Reform Act of 1995.
• Milestone Scientific believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate.
• Milestone Scientific undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
• Our computer-controlled injection devices make injections precise, efficient, and virtually painless.
• We believe our technologies are proven and well established.
• We believe that we and our technology solutions are recognized by key opinion leaders (i.e., academics, anesthesiologists and practicing dentists).
• The Company has decided to delay research and development on the STA Single Tooth Anesthesia System next generation instrument.

Industry Context

The company operates in the medical and dental device industry, focusing on computer-controlled anesthetic delivery systems. The receipt of a chronology-specific CPT code for the CompuFlo Epidural System in May 2022 (effective January 1, 2023) is a significant development, potentially expanding reimbursement opportunities and accelerating commercial rollout in the U.S. pain management market. This aligns with a broader industry trend towards advanced, precise, and patient-comfort-focused medical technologies. However, the slow adoption of epidural instruments and handpieces, as indicated by the allowance on slow-moving medical finished goods, suggests challenges in market penetration despite regulatory clearances and CPT codes.

Comparison to Industry Standards

• The company's focus on computer-controlled anesthetic delivery devices like CompuDent, STA Single Tooth Anesthesia System, and CompuFlo Epidural System positions it in a niche market aiming to improve precision and patient comfort compared to traditional manual syringes.
• The receipt of a chronology-specific CPT code for the CompuFlo Epidural System is a critical step for market adoption, as reimbursement codes are essential for widespread use in the U.S. healthcare system, a benchmark for medical device commercialization.
• The company's accumulated deficit of $131.5 million and ongoing operating losses, coupled with a 'going concern' warning, indicate a financial performance significantly below the profitability standards of mature, established medical device companies.
• The delay in R&D for the next-generation STA Single Tooth Anesthesia System could impact its competitive standing against other dental anesthesia innovations.

Management Changes

Corporate Governance

Related Party Transactions

• Issued $800,000 in promissory notes to directors Mr. Neal Goldman, Ms. Benedetta Casamento, and Dr. Didier Demesmin on April 9, 2025.
• Purchases from United Systems, the principal supplier of handpieces, were approximately $285,000 for Q2 2025 and $772,000 for 6M 2025. The company owed United Systems approximately $539,000 as of June 30, 2025.
• Royalty fees to the Director of Clinical Affairs were approximately $119,000 for Q2 2025 and $232,000 for 6M 2025. Consulting fees of $39,000 for Q2 2025 and $78,000 for 6M 2025 were also expensed to this director. The company owed this director approximately $125,000 as of June 30, 2025.
• Leonard Osser, Vice Chairman of the Board, has an Employment Agreement and Consulting Agreement, with expenses of $50,000 each for Q2 2025 and $100,000 each for 6M 2025. He also holds 2,717,765 shares and 2,481,048 shares to be issued upon termination of his employment agreement.
• University Pain Medicine Center (STEMMEE), where Dr. D. Demesmin (a board member) is CEO, purchased medical products totaling $15,000 for Q2 2025 and $21,000 for 6M 2025.
• Arjan J. Haverhals, a director, has a consulting agreement commencing January 1, 2025, with expenses of $67,000 for Q2 2025 and $216,000 for 6M 2025. He will be issued 912,736 shares six months after his resignation as CEO.

Stakeholder Impact

• Shareholders face significant dilution risk from potential future equity financings and convertible notes. The going concern warning poses a substantial risk to investment value.
• Employees may be impacted by continued operating losses and the need for cost reduction, potentially affecting job security or compensation. Stock-based compensation is a significant component of overall compensation.
• Customers may experience delays in product development (e.g., next-gen STA) which could impact future product offerings. The company relies on a few key distributors and its e-commerce platform.
• Suppliers face concentration risk, particularly with a few key suppliers including a related party (United Systems), which could lead to supply chain disruptions if relationships are strained.
• Creditors face increased credit risk due to the going concern warning and recurring losses. Convertible notes to related parties indicate a reliance on insider financing.

Next Steps

• Seek additional funding through equity or debt financings to support current operating plan.
• Actively pursue generation of positive cash flows from operating activities through increased revenue from dental and medical businesses worldwide.
• Reduce operating expenses.
• Continue efforts to establish DPS Dynamic Pressure Sensing technology platform as the standard-of-care.
• Expand global footprint of CompuFlo Epidural and CathCheck System.
• Evaluate the impact of ASU 2024-03 (effective January 1, 2027) on consolidated financial statements.
• Evaluate the impact of ASU 2023-09 (effective January 1, 2025) on consolidated financial statements.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a substantial net loss, rapidly declining cash reserves, and an explicit 'going concern' warning. While product sales show some growth, the cash burn from operations is unsustainable, increasing from $0.4 million to $2.8 million year-over-year for the six-month period. The delay in next-generation product R&D is a negative signal for future innovation. The reliance on related-party convertible debt highlights the difficulty in securing external financing under favorable terms. Given the significant liquidity risk, recurring losses, and the stated doubt about its ability to continue operations, the stock presents a high-risk profile with substantial downside potential for investors.

Keywords

Milestone Scientific, MLSS, 10-Q, Quarterly Report, Medical Devices, Dental Devices, CompuFlo Epidural System, STA Single Tooth Anesthesia System, DPS Dynamic Pressure Sensing, Anesthetic Delivery, Financial Results, Net Loss, Going Concern, Capital Raise, Biomedical Technology, FDA Clearance, CPT Code, Share Price