NOTE

8—

STOCKHOLDERS’ EQUITY

PUBLIC OFFERING AND PRIVATE PLACEMENT

February 2019,

Milestone Scientific consummated a public offering and a private placement of Common Stock. The public offering generated gross proceeds of approximately

$2.0

million for the issuance of

5,715,000

shares of common stock and warrants to purchase

1,428,750

shares of common stock. The warrants’ term is

years and they are exercisable at

$0.50

per share. Subsequent to the public offering the underwriter exercised its over-allotment option and paid approximately

$198,000

for

567,400

additional shares of common stock and

141,850

warrants.

Also, in

February 2019,

the Company generated gross proceeds from a private placement of approximately

$250,000

for

714,286

shares of common stock and warrants to purchase

178,571

shares of common stock from

Bp4

S.p.A., a principal stockholder of Milestone Scientific, that exercised its right to participate on a pro-rata basis on the recent public offering.

Bp4’s

CEO is a director of Milestone Scientific and also Chief Executive Officer and Director of Wand Dental, a wholly owned subsidiary of Milestone Scientific. The warrants’ terms are

years and they are exercisable at

$0.50

per share.

WARRANTS

The following table summarizes information about shares issuable under warrants outstanding at

September 30, 2019 :

	Warrant shares outstanding			Weighted Average exercise price		Weighted Average remaining life		Intrinsic value
Outstanding at January 1, 2019		1,592,775		$	2.55	$	0.21		-
Issued		1,749,171		$	0.50	$	4.35		560,199
Exercised		(57,750	)	$	0.50		-		-
Expired or cancelled		-			-		-		-
Outstanding and exercisable at September 30, 2019		3,284,196		$	1.49	$	2.30		560,199

See below for shares and warrants issued in excess of authorized shares for

2019

accounting treatment.

PREFERRED STOCK

May 2014,

Milestone completed a private placement, which raised gross proceeds of

$10

million, from the sale of

million of Milestone Scientific common stock (

two million

shares at

$1.50

per share) and

million of our Series A Convertible Preferred Stock ("preferred stock") (

7,000

shares at

$1,000

per share). These shares were convertible, at the option of the holder, into the number of shares of common stock equal to the stated value divided by

$2.545,

subject to anti-dilution adjustments, at any time before

May 14, 2019.

These shares were mandatory convertible on

May 14, 2019,

into the number of shares of common stock equal to the stated value divided by

$2.54

per share or

$1.50

per share if the common stock does

not

trade at

$3.15

for period of time, as defined by the agreements, both subject to anti-dilution adjustment.

May 14, 2019,

the mandatory conversion date, the Preferred Stock was converted at a rate of

$1.17

per common share resulting in the issuance of

5,982,906

shares of common stock.

SHARES TO BE ISSUED

As of

September 30, 2019,

there were

2,294,734

shares to be issued whose issuance has been deferred under the terms of an employment agreements with the Chief Executive Officer, Chief Financial Officer and other employees of Milestone Scientific. As of

December 31, 2018,

there were

1,908,813

shares, whose issuance has been deferred under the terms of an employment agreements with the Chief Executive Officer, Chief Financial Officer and other employees of Milestone Scientific. Such shares will be issued to each party upon termination of their employment.

As of

September 30, 2019

and

December 31, 2018,

there were

351,612

and

561,752

shares to be issued to non-employees, respectively, that will be issued to non-employees for services rendered. The number of shares was fixed at the date of grant and were fully vested upon grant date.

See below for shares and warrants issued in excess of authorized shares for

2019

accounting treatment.

SHARES AND WARRANTS IN EXCESS OF AUTHORIZED SHARES

As a result of the shares and warrants issued in the public and private offerings as well as other issuance of common stock during

2019,

the Company does

not

have a sufficient number of authorized shares of common stock to cover the exercise and issue of approximately

,850,000

outstanding equity instruments. Therefore, the warrants issued in the public and private placements during

2019

and

2016

are classified as liabilities and will continue to be liability-classified until there are sufficient number of authorized shares of common stock to cover the shares issuable upon exercise of the warrants. As long as the warrants are liability-classified, they will continue to be re-measured each reporting period, with any increase or decrease in value recorded as a loss or gain in the condensed consolidated statement of operations.

The fair value of the warrants is determined using a Black-Scholes option pricing model. The following assumptions were used to value the warrants at the reclassification to liability date:

	2016 Warrants			2019 Warrants
Fair Value of Common Stock		$.36-$.83		$	0.33
Expected Term	.2-.5 years			4.9 years
Volatility		86%-100%			83	%
Dividend yield		0.00	%		0.00	%
Exercise Price	$	2.55		$	0.50
Risk-free interest rate		1.88%-2.09%			2.30	%
Weighted average fair value of warrants granted	$	-		$	0.19
Number of shares underlying warrants granted		1,512,067			1,749,171

On the date of issuance and reclassification the fair value of the warrants was approximately

$376,000.

As these warrants are liability-classified, they were revalued at

September 30, 2019

using the following assumptions:

	2016 Warrants			2019 Warrants
Fair Value of Common Stock	$	0.83		$	0.08
Expected Term	0.2 years			4.4 years
Volatility		86	%		86	%
Dividend yield		0.00	%		0.00	%
Exercise Price	$	2.55		$	0.50
Risk-free interest rate		1.88	%		1.55	%
Weighted average fair value of warrants granted	$	-		$	0.61
Number of shares underlying warrants granted		1,512,067			1,691,421

As of

September 30, 2019

the fair value of the warrants was approximately

$1,017,000.

For the

three

and

nine

months ended

September 30, 2019

the loss on the liability classified warrants was approximately

$680,542

and

$674,792,

respectively.

Additionally, approximately

2.6

million of shares to be issued are classified as liabilities until there are sufficient number of authorized shares of common stock to cover the issuance of such shares. These shares were valued at the trading price of a share of the Company’s common stock (

$0.83

as of

September 30, 2019 )

and they will continue to be re-measured each reporting period, with any increase or decrease in value recorded as a loss or gain in the condensed consolidated statement of operations. For the

three

and

nine

months ended

September 30, 2019

the loss on the liability classified shares to be issued was approximately

$1.2

million, respectively. The value of the shares to be issued liability is approximately

$2.2

million as of

September 30 ,

2019.

The Company plans to seek shareholder approval to increase the number of authorized shares of Common Stock at the next Shareholder’s meeting, which has been scheduled for

December 17, 2019.