Milestone Scientific, Inc.

Good morning, ladies and gentlemen, and welcome to the Milestone Scientific Fiscal 2021 Year-End Business Update Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Natalia Rudman of Milestone Scientific. Ma'am, the floor is yours.

Thank you, Matt. Good morning, and thank you for joining Milestone Scientific's 2021 Year-End Financial Results Conference Call. On the call with us today are Ariane Haberhaus, Chief Executive Officer, and Keisha Harcum, Controller of Moscow Scientific. The company issued a press release today, Friday, April 1st, containing 2021 year-end financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact the Shenzhen Communications at 212-671-1020. The company's management will now provide prepared remarks reviewing the financial and operational results for the year ended December 31st, 2021. Before we get started, we would like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impacts of Mopsone's ability to implement its business plan, expected revenues, and future success. These statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future economics, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately, and many of which are beyond my control. Some of the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are general economic conditions, failure to achieve expected revenue growth, changes in our operating expenses, adverse patent rulings, FDA or legal development, competitive pressures, changes in customer market requirements and standards, and the risk factors detailed from time to time in Milestone's periodic filings with the Security and Exchange Commission, including without limitation, Milestone's report on 410K for the year ended December 31st, 2021. The forward-looking statements made during this call are based upon management's reasonable belief as of today's date, April 1st, 2022. Milestone undertakes no obligation to revise or update publicly any forward-looking statements for any reason. With that out of the way, we'll now turn the call over to Aryan Haverhal, Chief Executive Officer. Please go ahead, Aryan.

Thank you, Natalia, and thanks to everyone for joining us today. We achieved a 90% year-over-year growth in revenue to $10.3 million, surpassing our prior revenue guidance and exceeding pre-pandemic levels. We achieved these results despite of the impact of COVID-19 which indicates that we are successfully navigating the pandemic and remain on a solid growth trajectory. At the same time, we continue to carefully manage our expenses while investing in sales, marketing, and new product development, along with analyzing new areas for our technology. The growth in the dental division reflects the success of our three-year multi-distribution strategy to expand the worldwide global dental market. As a result, we are successfully adding domestic and global distribution partners. As an example, we recently announced an agreement with Endow Medical to distribute the STA single tooth anesthesia system in the United States and Canada. In the United States, we are looking to bring on new strategic channel partners that can help sell through their network of dental customers in specialized areas of dentistry, such as implant dentistry and aesthetics, as well as large dental groups, also known as dental service organizations, or DSOs, and educational partners as they train the current and next generation of dentists. In parallel, we look forward to further expanding our international sales and are working closely with our new global distributors We believe that through this decentralized sales strategy, in combination with our increased marketing efforts, we can further grow the dental business in the coming years. Our dental business continues to generate positive cash flow on a standalone basis. As we continue to grow this business, we expect to benefit from economies of scale due to the recurring nature and high margins on our disposables. At the same time, we have made progress over the past year, advancing our commercial efforts around the CompreFlow epidural instrument and cath check system. In the beginning of 2021, we had some major setbacks due to organizational issues and the pandemic. However, due to the arrival of vaccines and vaccination programs, hospitals started opening up again during the second quarter of last year. that triggered our decision to invest heavily in our new sales force. As of August, when the real medical commercialization began, management decided that 11 salespeople over the first few months would be the correct number in the United States. Irrespective of the individual changes within that group, it is still our goal to maintain 11 full-time experienced sales representatives in the field that are calling on hospitals every day. We are setting high performance standards for our sales team and monitor their performance closely on a daily basis. We will continue to add sales personnel as appropriate. During the second half of 2021, there was a strategic decision to focus additional efforts resources in trade and consumer marketing communications both the medical and dental brands received a soft image refresh to better align with product messaging through the enhanced brand awareness and stronger digital presence new tools and tactics were deployed to aid our sales representatives and drive qualified leads these materials include training and brand videos educational literature digital marketing materials, and consumer media relations, where Milestone Scientific was recently featured on ZDNet, a media outlet with over 8 million monthly users. From a digital marketing perspective, we've had success in our website traffic. As an example, from the first quarter in 2021 to the first quarter this year, our website visitors have increased by 187%. we are deploying an integrated marketing communication strategy that elevates our brand's awareness and targets key audiences. As a result of our combined sales and marketing initiatives, we have begun to sell our disposables to key hospitals, healthcare systems, and pain management clinics, despite a setback related to the pandemic, which I'll discuss in further detail in a moment. Although we are not always allowed to disclose the names in 2021, we announced sales to the following hospitals. First, we signed an agreement and were approved as vendor in a major northeast teaching hospital, which is part of one of the leading health systems in the United States. We introduced our technology at Memorial Regional Hospital, the flagship facility of the Florida Memorial Healthcare System, and one of the largest hospitals in Florida. Additionally, we received approval to eventually supply our CompuFlow epidural and catch-check verification system disposables across Memorial Healthcare System's network of hospitals. We're selling into University of Texas Medical Branch in Galveston and added Health Clear Lake Campus Hospital belonging to the same group, a major academic health science center of global influence. We're selling into a regional medical center, a premier regional healthcare system in South Carolina. And internationally, we are selling into the University Hospital of Würzburg, one of the leading national hospitals in Germany, in particular for the thoracic indication, approved in Europe where the incident rates of mobility are much higher for this indication. In addition, we have expanded our global reach by adding new international distributors in markets such as Austria, Switzerland, Canada, Slovenia, and the United Arab Emirates. We're also in the process of bringing on new distributors in additional markets. Each of these distributors brings relationships within key global markets and proven track records introducing medical devices within their territories. Turning back to our domestic sales initiatives, in December alone, immediately preceding the spike in Omicron cases, we announced the addition of three leading hospitals, all of which belong to large healthcare systems. However, our activities came to an abrupt halt. It is important to note that the pandemic had a significant impact on the labor and delivery departments within hospitals, much more so than other departments. This was due to the fact that many pregnant women have opted out of the vaccine, resulting in stricter restrictions than other departments. As a result, our sales team was unable to enter the operatories, which limited our ability to demo and trial the instruments. With the pandemic and specifically the Omicron variant now waning, The restrictions have begun to ease, and we are resuming activities, although delayed by several months. This doesn't mean that there won't be another variant or spike that could impact our business, but assuming things remain stable, our reps are back in the field and we are picking up where we left off. Our sales pipeline is solid and growing, and we are advancing discussions with a number of hospitals and healthcare institutions. In addition to our growing regional presence, especially in Florida, we're also targeting Tier 1 university teaching hospitals. Some of these hospitals are among the top 20 in the nation. We believe that as we begin to penetrate some of these larger, well-recognized names, that will add greater credibility and reduce the sales cycle with some of the smaller institutions. We also continue to expand sales of our CompuFlow Epidural System within pain clinics across the US. With over 11 million reported epidural procedures each year, the pain market segment is at least twice the size of the labor and delivery market segment. The pain management market not only includes numerous hospitals, but also specialty centers, outpatient centers, and sports medicine centers. We are receiving positive feedback among clinics and physicians based on our ability to achieve better outcomes at lower cost. We recently announced that a leading pain management specialist, Dr. Harsh Govil, has begun using our technology within his practice at Pittman Healthcare. Similarly, Dr. Miguel de la Garza, a recognized leader in pain management and president of the Florida Society of Interventional Pain Physicians, has begun using our technology within his practice. Dr. De La Garza conducts these procedures at Surgery Partners, one of the largest and growing surgical services businesses in the country, which has also approved the CompuFlow epidural instrument for use across the network in pain management As a result of the pandemic and the issues I explained earlier, we've put strong emphasis on the pain clinics in the first quarter of this year. As you can see, these efforts are paying off. Just this week, we announced we commenced sales of the CompuFlow epidural disposables with the Cypress Surgery Center in Santa Maria. California and the Galileo Surgery Center in San Luis Obispo pain management specialist in California. Both of these prominent pain management practices are located in California and owned by pain management specialists. We are now selling our disposables in the first two of pain management specialist three clinics. The third clinic was closed as they shifted resources during the pandemic, but we aim to sell into the third clinic after it reopens. Fortunately, pain clinics have been less impacted than labor and delivery departments following the latest spike in cases, but we believe we have weathered the worst of the storm and are well positioned in both the pain management as well as labor and delivery markets as the pandemic hopefully continues to recede. So to summarize, we remain committed to our goal of establishing the CompreFlow epidural instrument as the new standard of care in epidural anesthesia by providing patients with effective pain relief while reducing the risk of complications. Our CompreFlow epidural system offers objective detection of pressure changes to verify true loss of resistance and confirm epidural space within minutes. The clinical and safety benefits of the CompuFlow Epidural System are backed by extensive published clinical data demonstrating significant reductions in epidural punctures and complication rates, as well as economic benefits for the institutions. At this point, I'd like to turn the call over to our Kisha Harkin, controller, to go over the financials in detail. Please go ahead, Kisha.

Thank you, Arjun. Total revenue for the year ended December 31st, 2001 was 10.3 million versus 5.4 million for the same period last year. Dental revenue for the year ended December 31st, 2001 was 10.1 million versus 5.4 million for the same period last year. Dental revenue increased approximately 4.7 million for the year ended December 31st as compared to 2020 due to the reopening of dental offices throughout the country and the rest of the world. Medical revenue for the 12 months ended December 31st, 2020 was approximately 152,000 versus 16,000 for the year ended December 31st, 2020. And we began opening new customers through direct sales force and medical device distributors. Gross profit for the year ended December 31st, 2001 was 6.3 million or 61% of revenue versus 3.6 million or 67% of revenue for the year ended December 31st, 2020. Operating loss. for the year ended December 31st, 2021 was approximately 7.4 million versus approximately 7.5 million for the year ended December 31st, 2020. Net loss attributed to the common shareholders was approximately 6.8 million or 10 cents per share for the year ended December 31st, 2021 versus the net loss of 7.3 million or 12 cents per share cents per share for the comparable period in 2020. Now I would like to turn your attention to the liquidity and capital resources. At December 31st, 2021, the company had cash and equivalents of $14.8 million. Total current assets was approximately $18.9 million and working capital of $15.8 million. At this point, I'd like to turn the call back over to Arjun Harahal.

Arjun Harahal Thank you, Keisha. As Keesha mentioned, we continue to maintain a strong balance sheet with approximately 14.8 million of cash and cash equivalents as of December 31st, 2021, which provides us substantial resources and the ability to accelerate our sales and marketing activities around both our dental and medical instruments. Given our strong cash position, we are also planning to launch new instruments and are pursuing new indications. Within dental, we are encouraged by the growing interest in our instrument and expect our momentum to continue in 2022. Through our new decentralized sales strategy and our enhanced marketing efforts around the STA single-tooth anesthesia instrument, we believe this will increase our market penetration as we focus on the significant value drivers of our instruments, including safety, efficiency, and importantly, supporting the growth of dental practices. We believe we have developed an efficient and scalable platform to help drive our dental instruments and handpieces sales in the coming years. In addition, we remain confident in the market potential of the CompuFlow epidural system. which we believe will transform the industry and ultimately become the standard of care. Importantly, we have begun selling our CompuFlow epidural disposables to a number of hospitals, medical centers, and pain management clinics in the United States and Europe. But we have barely scratched the surface. In order to capitalize on this opportunity, We are expanding our sales and marketing initiatives which has resulted in a solid sales pipeline including trials on the way that we believe will convert to new purchase orders. We remain committed to driving shareholder value and look forward to providing further updates as developments unfold. I'd like to thank you for joining the call today and at this point we would like to open the call up to questions. Operator?

Certainly. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset, if you're listening on speakerphone, to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Please hold while we poll for questions. Your first question is coming from Anthony Vendetti from Maxim Group. Your line is live.

Thank you. Arien, I wanted to focus on the pain market because you mentioned it's twice the labor and delivery market. And you have 11 sales people. You've signed up some good accounts, some of which you some well-known accounts you mentioned on the call. And and. I was wondering if you could talk about a little bit about how you're increasing the marketing spend. I know you have 11 salespeople. What exactly are you targeting to continue to grow the pain market? And then as you sign up these hospitals, how do you get the hospitals to increase their utilization so that the contracts start resulting in material revenues. Thank you.

Thank you, Anthony. Thank you for asking these excellent questions. So let me start with the pain segment. Like I mentioned in the introduction this morning, we emphasized on the pain market segment and what is important. I would assume that people know how the private pain market would work as well. the importance of the reimbursement code. And so that's part of our strategy as well, because prior management over the years looked at the submission of a CPT code. That's the reimbursement code. But the rules at that time prohibited a submission as, for example, data of about 25,000 patient procedures performed needed to be provided. However, we learned and we have evaluated whether these rules still apply and very fortunately learned that the game changed. We engaged a consultant specialized in the submission of such code and we have submitted and filed for a technology specific code in February this year. And of course, this is not a guarantee but I'm guardedly optimistic to obtain a reimbursement, a temporary reimbursement code in a year time. And that would potentially have a great impact on the commercialization within the pain, both the private and the chronic pain market segment. And you know, Anthony, the same accounts for the thoracic indication. I mentioned that the thoracic indication It's used and approved in Europe. And to give you a little bit of flavor, the thoracic indication, it accounts for over 30% of all epidural procedures in the United States alone. A study in this indication with our technology was completed at the University of Iowa, and the results were presented at a major anesthesia meeting in the first half of 2021. And we are planning to submit a 510k FDA submission for obtaining the approval of this indication. And again, I'm guardedly optimistic to receive a positive outcome by the FDA. There's approval in the second half of this year potentially, which also might have an impact on increasing adoption and penetration in hospitals and pain clinics because the thoracic indication is an important indication also for pain management. Now to go to the second part of your questions, if I understood correctly, you were interested how would we increase the utility once we are in a hospital? And I thank you for asking this question because I didn't address that in my presentation. So we call it, we have applied a land and expand strategy. We have in our team territory managers that are particularly very well skilled in hunting activities and closing activities. But then also when we are inside the hospitals to further increase the volume and the utility at the hospitals, we have recruited two clinical specialists that are going to stay at the hospital on a daily basis helping with the nursing staff and the anesthesia staff to push and to increase the penetration and the adoption and the utility at these hospitals. So instead of a sales rep being in there every day, we have a dedicated specialist, clinical specialist, which the background in the two people that we have recruited are nurses in anesthesia that know the operatory room environment and then in this way can further increase the utility and the usage of our disposables. So does that answer your question, Anthony?

Yes. No, that's very helpful. Yeah, I think you've correctly identified. It's critical. We see this across many medical device companies over the years. If you don't have you know, if they're not well trained and you don't have someone on site to help increase that utilization, sometimes that utilization doesn't pick up. And so having anesthesia nurses that know exactly how to use this and train is, I think, critical for increasing utilization. So very helpful. Absolutely. You're welcome, Anthony. Thank you.

Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star 1 on your phone at this time. Your next question is coming from James Vistat. Your line is live.

Thank you. I would go back to the revenues of 2016, which were $10,482,000. And after that, the revenues continue to decline. So the company has got a long way to go to get back to even where they were or somewhat. It appears that the majority or almost all of the sales come from the dental. The question would be, one of the questions would be direct sales reps of 11 people. Are those full-time people that just try to introduce slash sell the compute flow to facilities or do they have a package of things that they're trying to sell to facilities yeah so thank you thank you for your question I would like to comment on your observation which is absolutely correct that going back to 216 we

sales, the revenues were $10, $11 million, and then there was a decline. I would like to explain why that was, because during those years, all the money that we earned in the dental business was invested in the medical business. And also, the focus of the company was, like I said, investing in the research and development of the CompreFlow epidural system and disposables. and that then also resulted that it was almost a one-man show for the dental business. So in other words, there was not enough human and working capital available to really focus on the dental business, also including investing in the right marketing and sales activities. And that was the reason why the board of directors in 2020 decided to recruit people with a background in the dental industry and to revamp the dental business and more importantly the board at that time decided to raise capital and that resulted at the end of 2020 to have about 14.5 million in cash and cash equivalents by the end of the year so that made it possible for current management to put the shoulders under it and to invest in marketing and sales activities to revamp the dental business and the mandate the board has given me and us and management team is to grow the dental business exponentially in the coming years. I just wanted to make that clear. The second part of your question, yes, absolutely. territory managers that we are having. They are full-time equivalents, so they only focus on our portfolio, and they only focus on the CompuFlow epidural system, including the disposables, the CatChat disposables, and they call on hospitals and the private pain clinics. So they are not 1099s. They do not have a diversified product portfolio. They are laser-focused. on our company, on our product portfolio, and our customer targets, which encompasses the anesthesiologists, the CRNAs, the pain physicians, the C-suite, the admin suite, the financial, the risk management procurement, and material supply.

Thank you. That concludes our Q&A session. I will now hand the conference back to Arjan Haverhals, CEO of Milestone Scientific, for closing remarks. Please go ahead.

Yes, again, thank you for your time and interest and trust in our company. I would like to highlight that I'm pleased with the results that we were able to obtain in the past years. Management is also pleased and convinced about the positive outlook that we see for our company in this year. If you need and if you have any further questions, then please reach out to me or visit our website at milestonescientific.com. And please do stay safe. Thank you for your time and have a good day.

Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.