NOTE 7 — STOCK OPTION PLANS

The Milestone Scientific Inc., Amended and Restated 2020 Equity Incentive Plan (the “2020 Plan”) provides for awards of restricted common stock, restricted stock units, options to purchase shares and other awards. At June 30, 2026, the maximum number of shares that could be issued thereunder was 11,500,000 shares of common stock., On July 27, 2026, the stockholders of the Company amended the 2020 Plan to increase the maximum number of shares that can be issued thereunder to 28,750,000 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 3-year period from the grant date and expire 5 years after the date of grant.

Additionally on April 30, 2026, the Compensation Committee recommended the grant of performance-based restricted stock units (“PRSUs”) to certain officers of the Company. As all of the PRSUs are to have the same performance milestones and other terms and conditions (other than the actual grant amounts), the Compensation Committee established a sub-plan of the 2020 Plan (the “Sub-Plan”) as the framework together with the 2020 Plan for the award of PRSUs (each, an “Award” and collectively, “Awards”), with a fixed pool of PRSUs. The total aggregate number of shares of common stock that to be issued under 2020 Plan will be adjusted to 28,734,635, an increase of 17,234,635 shares as a result of the approval of the Sub-Plan (the “Aggregate Pool”). The recommendation of the award of PRSUs under the Sub-Plan was subject to stockholder approval to increase the number of shares covered by the 2020 Plan to account for the recommendation to issue PRSU awards under the Sub-Plan, which increase was approved by the stockholders at the Company’s Annual Meeting on July 27, 2026 as aforesaid.

On April 30, 2026 (the “Effective Date”), the Compensation Committee of the Board of Directors (the “Compensation Committee”) of the Company approved a one-time stock option exchange program (the “Exchange Program”) for outstanding stock options granted under the Company’s 2020 Plan and the applicable award agreements thereunder, held by Eric Hines, the President and Chief Executive Officer, and Jason Papes, the Senior Vice President, Global Head of Sales and Marketing, of the Company (“Eligible Options”), all of which have exercise prices that exceed the current fair market value of the Company’s common stock (the “Common Stock”). The Exchange Program was undertaken in accordance with, and as expressly permitted by, the 2020 Plan and the applicable award agreements thereunder, and provides that such eligible participants may voluntarily elect to surrender some or all of their Eligible Options in exchange for newly granted stock options to purchase shares of the Company’s Common Stock, at an exercise price reduced to $0.27 per share (the “Reduced Exercise Price, which exercise price equals the closing price of the Company’s Common Stock on the Effective Date (the “Repricing”). All of the Eligible Options (i) were granted under the 2020 Plan, (ii) as of the Effective Date, were held by continuing employees, (iii) had not previously been repriced and (iv) had an exercise price per share greater than the Reduced Exercise Price (the “Repriced Options”). The Repriced Options have the same vesting commencement date and expiration date as the respective Eligible Options surrendered. In addition, for each Repriced Option, the vesting schedule was modified such that the number of shares vesting on the applicable vesting commencement date was increased from 200,000 to 500,000 shares, constituting twenty-five percent (25%) of the total number of shares subject to the Repriced Option, and providing for the vesting of the remainder of the shares subject to the Repriced Options in two equal tranches of 750,000 shares on the first and second anniversaries of the applicable vesting commencement date rather than over three years from the vesting commencement date, subject to the continued employment of the grantee on the applicable vesting date and compliance with certain restrictive covenants. No other changes were made to the Repriced Options as a result of the Repricing.

The number of shares of Common Stock issuable upon the exercise of each of the Repriced Options (2.0 million shares), and the total number of shares underlying all Repriced Options (4.0 million shares), remains the same number of shares as underlying the respective Eligible Options surrendered, in accordance with the 2020 Plan. The Eligible Options previously had exercise prices ranging from $0.46 to $0.50 per share and were granted in August 2025.

The Company accounted for each Repriced Option as a modification under ASC 718, Compensation—Stock Compensation, and the Company measured the fair value of the modified awards immediately before and immediately after the modification using the Black-Scholes-Merton option-pricing model.

The Company estimated the fair value of the Repriced Options immediately before the Effective Date using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 3.86%, expected volatility of 82.3% (based on the Company’s historical volatility over the expected term), an expected term of 5.2 years, a dividend yield of 0%, and a stock price ranging from $0.45 to $0.50.

The Company estimated the fair value of the Repriced Options immediately after the Effective Date using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 1.75%, expected volatility of 86.6% (based on the Company’s historical volatility over the expected term), an expected term of 5.7 years, a dividend yield of 0%, and a stock price of $0.27.

As a result of the measurement of the modified awards immediately before and after the modification date, the Company determined an incremental fair value of $146,000 related to the modified awards. This incremental fair value of $146,000 is being recognized as compensation expense over the remaining requisite service period of the replacement awards. Any unrecognized compensation cost associated with the original, canceled awards continues to be amortized over the original vesting periods.

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 three and six months ended June 30, 2026, Milestone Scientific recognized approximately $239,000 and $496,000 of total employee compensation cost, respectively, recorded in general and administrative expenses on the statement of operations. For the three and six months ended June 30, 2025, Milestone Scientific recognized approximately $158,000 and $329,000 of total employee compensation cost, respectively, recorded in general and administrative expenses on the statement of operations.

As of June 30,2026, there was approximately $943,000 of total unrecognized compensation cost related to non-vested options. Milestone Scientific expects to recognize these costs over a weighted average period of 2.1 years.

A summary of option activity for employees under the plans and changes during the six months ended June 30, 2026 is presented below:

 SCHEDULE OF STOCK OPTION ACTIVITY

A summary of option activity for non-employees under the plans and changes during the six months ended June 30, 2026 is presented below:

 SCHEDULE OF STOCK OPTION ACTIVITY

For the three and six months ended June 30, 2026 Milestone Scientific recognized approximately $1,200 and $2,400 expense related to non-employee options, respectively. For the three and six months ended June 30, 2025 Milestone Scientific recognized approximately $1,400 and $8,000 expense related to non-employee options, respectively.

A summary of restricted stock under the plans and changes during the six months ended June 30, 2026 is presented below:

 SCHEDULE OF RESTRICTED STOCK

On January 1, 2026, the Company entered into restricted stock agreements with members of the Board of Directors of the Company. The Company granted 681,818 restricted stock awards with a fair market value of $0.33 per share. Such restricted stock vests as follows: 25% on the grant date in January 1, 2026, and the remaining 75% vesting 25% each on April 1, 2026, July 1, 2026 and October 1, 2026. These awards vest immediately upon a change of control as defined in the agreements.

For the three months ended June 30, 2026 and 2025, the Company recognized approximately $56,000 and $1,500 for restricted stock expenses recorded in general and administrative expenses on the statement of operation. For the six months ended June 30, 2026 and 2025, the Company recognized approximately $112,000 and $155,500 for restricted stock expenses recorded in general and administrative expenses on the statement of operation.

As of June 30, 2026 there was $113,000 of unrecognized compensation expense related to these awards.