Milestone Scientific (MLSS) Risk Analysis

In recent years, many legislative ?proposals have been introduced or proposed in Congress and in some state legislatures that would affect major changes in the healthcare system, either nationally or at the state level. At the federal level, Congress has continued to propose or ?consider healthcare budgets that substantially reduce payments under the Medicare and Medicaid programs. Healthcare legislative reform measures may have a material adverse effect on our business and results of operations. In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality, and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the "ACA,") was passed, which substantially changed the way healthcare is financed by both the government and private insurers and significantly impacts the U.S. pharmaceutical industry. Since its enactment, there have been judicial, congressional and executive branch challenges and amendments to certain aspects of the ACA. For example, on August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law, which, among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the "donut hole" under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary's maximum out-of-pocket cost through a newly established manufacturer discount program. It is possible the ACA will be subject to judicial or congressional challenges and amendments in the future. On July 4, 2025, the annual reconciliation bill, the One Big Beautiful Bill Act (the "OBBBA") was signed into law which is expected to reduce Medicaid spending and enrollment by implementing work requirements for some beneficiaries, capping state-directed payments, reducing federal funding, and limiting provider taxes used to fund the program. OBBBA also narrows access to the ACA marketplace exchange enrollment and declines to extend the ACA enhanced advanced premium tax credits, which expired in 2025, and which, among other provisions in the law, are expected to reduce the number of Americans with health insurance. Also, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which have resulted in several congressional inquiries, presidential executive orders, and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, the IRA, among other things, (1) directs the U.S. Department of Health and Human Services ("HHS") to negotiate the price of certain high-expenditure, single-source drugs covered under Medicare that have been on the market for at least 7 years (the "Medicare Drug Price Negotiation Program") and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions began to take effect progressively in fiscal year 2023. On August 15, 2024, HHS announced the agreed-upon reimbursement prices of the first ten drugs that were subject to price negotiations, although the Medicare Drug Price Negotiation Program is currently subject to legal challenges. On January 17, 2025, HHS elected up to fifteen additional products covered under Part D for price negotiation in 2025. Each year thereafter, more Part B and Part D products will become subject to the Medicare Drug Price Negotiation Program. On December 8, 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights, which, for the first time, includes the price of a product as one factor an agency can use when deciding to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework. New regulation of drugs may also cover new regulation of medical devices. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. For example, on January 5, 2024, the FDA approved Florida's Section 804 Importation Program ("SIP") proposal to import certain drugs from Canada for specific state healthcare programs. It is unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to legal challenges in the United States or Canada. Other states have also submitted SIP proposals that are pending review by the FDA. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. We expect that additional state and federal healthcare reform measures will be adopted in the future. The current Trump administration is pursuing policies to reduce regulations and expenditures across government, including at HHS, the FDA, CMS, and related agencies. These actions, presently aimed at executive orders or memoranda from the Office of Management and Budget, may propose policy changes that create additional uncertainty for our business. These actions and proposals include, for example, (1) directives to reduce agency workforce and cut programs; (2) rescinding a Biden administration executive order tasking the Center for Medicare and Medicaid Innovation to consider new payment and healthcare models to limit drug spending; (3) eliminating the Biden administration's executive order that directed HHS to establish an AI task force and develop a strategic plan; (4) directing HHS and other agencies to lower prescription drug costs through a variety of initiatives, including by improving upon the Medicare Drug Price Negotiation Program and establishing Most-Favored-Nation pricing for pharmaceutical products; (5) imposing tariffs of imported pharmaceutical products; and (6) directing certain federal agencies to enforce existing law regarding hospital and price plan transparency and by standardizing prices across hospitals and health plans. Additionally, Congress may introduce and ultimately pass healthcare-related legislation that could impact the drug approval process and make changes to the Medicare Drug Price Negotiation Program created under the IRA. We expect additional health reform measures may be implemented in the future, particularly given the recent change in administration. We expect that healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and additional downward pressure on the price that we receive for a medical device. The ?ultimate content, timing, or effect of any healthcare reform legislation and the impact of potential legislation on us is ?uncertain and difficult, if not impossible, to predict. Reductions in Medicare and Medicaid reimbursement rates, as well as decreased government spending, for certain drugs and medical devices, may adversely affect demand for our products and services. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Any such reductions or spending limitations, whether through legislative action, regulatory change, budgetary pressure, or otherwise, could expand over time and materially impact the utilization of our technologies and our overall financial performance. There can be no assurance that future initiatives on reimbursement or coverage policies will not be modified in ways that negatively affect our business, financial ?condition, results of operations, and/or prospects.

Federal government actions to impose tariffs and limit research grants and other funding, including funding for universities and research enterprises, may cause disruption to our business. To the extent the Company seeks to invest in product enhancements or next-generation development, including further advancement of the CompuFlo Epidural platform, government actions that constrain collaborative research funding may reduce the pool of available research partners and increase the cost and difficulty of such efforts. In addition, tariffs are likely to increase the cost of doing business, particularly given the Company's reliance on Chinese manufacturers for handpieces and other key components, and reduced research funding may make it more difficult for the Company to attract capital from investors who consider the availability of funded development partners as part of their investment analysis.

In general, our success depends upon the quality of our products. Quality management plays an essential role in meeting customer requirements, preventing defects, improving our products and services, and assuring the safety and efficacy of our products. Our future success depends on our ability to maintain and continuously improve our quality management program. A quality or safety issue may result in adverse inspection reports, warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution of products, civil or criminal sanctions, costly litigation, refusal of a government to grant approvals and licenses, restrictions on operations or withdrawal of existing approvals and licenses. An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products.

There is no assurance that physicians, hospitals, clinics, and other healthcare providers will accept and use the CompuFlo Epidural System. Market acceptance depends on many factors, including perceived safety and effectiveness, cost-effectiveness relative to competing products, convenience and reliability, patient satisfaction, product availability, warranty and technical support, reimbursement availability, and the effectiveness of our marketing and distribution., Because we expect sales of the CompuFlo Epidural Computer Controlled Anesthesia System to generate substantially all our medical product revenues in the near-term, the failure of this product to find market acceptance would harm our medical business. It could require us to seek additional financing or make such financing difficult to obtain on favorable terms, if at all. Since the Company generates a significant portion of its net sales from a single product category, a decline in demand for that product could significantly impact our net sales and gross margins.

The Company relies on several third parties to supply and manufacture the components and raw materials for its products, and it does not have long-term supply agreements with suppliers of these component parts and raw materials, and its arrangements with these suppliers are on a purchase-order basis. These products we obtain from suppliers are subject to fluctuations in price and availability attributable to several factors, including general economic conditions, commodity price fluctuations, the demand by other companies for the same raw materials, and the availability of complementary and substitute materials. While we work with suppliers to ensure continuity of supply, no assurance can be given that these efforts will be successful. In the event that any of its existing supply arrangements are terminated or there is a reduction or interruption of supply under these existing arrangements, We expect that we will be able to enter into new arrangements with alternative suppliers, but these new arrangements may be on terms that are less favorable, including with respect to price and volume, and it may be costly or cause delays in our manufacturing process to transition to a new supplier, particularly in cases in which we must comply with regulatory requirements relating to qualification of new suppliers. The termination, reduction or interruption in supply of these raw materials and components could adversely impact our ability to manufacture and sell certain of its products. Third-party suppliers may encounter problems during manufacturing for a variety of reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, equipment malfunction, component part supply constraints, and environmental factors, any of which could delay or impede their ability to supply the components and raw materials for our products. Any such failure to perform or a reduction or interruption in supply could have a material adverse effect on our business and operations.

Although we do not have direct sales, operations, or customers in regions experiencing significant instability, such as Venezuela, recent labor strikes, political instability, and economic conditions in Venezuela may contribute to broader regional or global disruptions, including impacts on international trade relationships, energy markets, currency volatility, or global logistics networks. In addition, changes in diplomatic relationships, foreign policy positions, or international regulatory frameworks involving countries experiencing political or economic instability could result in new or expanded trade restrictions, sanctions, compliance obligations, or logistical challenges imposed by foreign governments, as well as the United States. Such developments could indirectly affect the availability or cost of certain inputs, transportation services, or third-party suppliers upon which we rely. While we believe our current supply chain and manufacturing operations are diversified and resilient, we cannot assure investors that future geopolitical developments will not result in increased costs, delays, or other adverse effects on our business, financial condition, or results of operations.

The Company generates a meaningful portion of its revenue from international markets through a global distribution network spanning more than 30 countries. International operations are subject to risks including economic instability, regulatory changes, supply chain disruptions, and geopolitical events. For example, ongoing geopolitical tensions, including conflicts in Eastern Europe and the Middle East, have disrupted certain markets served by the Company's international distributors and may adversely impact demand, distribution, and revenue in affected regions. Continued or escalating geopolitical instability could further negatively impact the Company's international sales. Our business is subject to significant risks arising from our dual exposure to China as both a manufacturing source and a sales market. The Company relies on Chinese third-party manufacturers for a substantial portion of its products and also previously generated revenue from Chinese distributors. During the three months ended June 30, 2026, revenue from China increased to $498,000, compared to $0 in the prior period. Simultaneously, escalating U.S.-China trade tensions and newly imposed tariffs have increased the cost of sourcing products and components from China. This dual exposure - reduced revenue from Chinese customers and increased costs from Chinese suppliers - may materially and adversely affect our results of operations. Furthermore, regulatory actions by either the U.S. or Chinese government, including export controls, retaliatory trade measures, restrictions on technology transfer, or sanctions, could further disrupt our supply chain or eliminate our ability to sell into the Chinese market entirely. Any such developments could have a material adverse effect on our business, financial condition, and results of operations.

Third parties may claim that one or more aspects of our technologies or products may infringe on their intellectual property rights. Our computer-controlled anesthesia systems are complex systems and numerous U.S. and foreign patents and pending patent applications owned by third parties exist in fields that relate to the development and commercialization of drug delivery systems. In addition, many companies have employed intellectual property litigation as a strategy to gain a competitive advantage. It is possible that infringement claims may occur as the number of products and competitors in our market increases. In addition, to the extent that we gain greater visibility and market exposure as a public company, we face a greater risk of being the subject of intellectual property infringement claims. We cannot be certain that the conduct of our business does not and will not infringe intellectual property or other proprietary rights of others in the United States and in foreign jurisdictions. If any of our computer-controlled anesthesia systems are found to infringe third party patent rights, we could be prohibited from manufacturing and commercializing the infringing technology unless we obtain a license under the applicable third-party patent and pay royalties or are able to design around such patent. We may be unable to obtain a license on terms acceptable to us, or at all, and we may not be able to redesign the system to avoid infringement. Even if we can redesign our products or processes to avoid an infringement claim, our efforts to design around the patent could require significant time, effort and expense and ultimately may lead to an inferior or costlier product. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from our business. Furthermore, if any such claim is successful, a court could order us to pay substantial damages, including compensatory damages for any infringement, plus prejudgment interest and could, in certain circumstances, treble the compensatory damages and award attorney fees. This damage could be substantial and could harm our reputation, business, financial condition, and operating results. A court also could enter orders that temporarily, preliminary, or permanently prohibit us, our licensees, if any, and our customers from making, using, selling, offering to sell, or importing one or more of our products or using our proprietary technologies or processes, or could enter an order mandating that we undertake certain remedial activities. Any of these events could seriously harm our business, operating results, and financial condition.

We believe that a significant portion of our sales will continue to be from its E-Commerce platform launched in January 2023, for the foreseeable future. Currently, sales of the STA Single Tooth Anesthesia Systems (STA) and handpieces in the United States are reliant on E-Commerce sales. We have exposure to risks of operating in an E-commerce platform: - Refunds and customer disputes due to issues like wrong product delivery or defective items can impact our business;     - Online security breaches and cyberattacks;     - Poor search engine visibility affects traffic and sales; and     - Unexpected changes in political or regulatory environments. If we are unable to maintain or expand our E-Commerce platform, our sales will be negatively affected.