Milestone Scientific Inc.

Good morning, everyone, and welcome to the Milestone Scientific Incorporated first quarter 2024 financial results and business update conference call. At this time, all participants are in a listen-only mode, and we will open for questions following the presentation. If anyone should require operator assistance during the conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, David Waldman, Cushendo Communications. The floor is yours.

Good morning, and thank you for joining Milestone Scientific's first quarter 2024 financial results conference call. On the call with us today are Ariane Haverhall, Chief Executive Officer, and Keisha Harcum, Vice President Finance of Milestone Scientific. The company issued a press release this morning containing first quarter 2024 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 Crescendo Communications at 212-671-1020. The company's management will now provide prepared remarks reviewing the financial and operational results for the first quarter ended March 31st, 2024. Before we get started, we'd like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of Milestone'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 economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately, and many of which are beyond milestones control. Some of the important factors that could cause actual results 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 and adverse patent rulings, FDA or legal developments, competitive pressures, changes in customer market requirements and standards, and the risk factors detailed from time to time, and milestones periodic filings with Securities and Exchange Commission, including without limitation milestones report on Form 10-K for the year ended December 31st, 2023, and milestones report on Form 10-Q for the first quarter ended March 31st, 2024. The forward-looking statements made during this call are based upon management's reasonable belief as of today's date, May 16th, 2024. Milestone undertakes no obligation to revise or update publicly any forward-looking statements for any reason. With that, we'll now turn the call over to Arjen Haverhals, Chief Executive Officer. Please go ahead, Arjen.

Thank you, David, and thanks to everyone for joining us today. We achieved revenue of more than $2.2 million for the first quarter of 2024. Although our revenue was down slightly compared to the same period last year, this was largely a reflection of a reserve reversal in the first quarter of 2023. coupled with a decline in international sales during the first quarter of 2024. However, these results do not reflect the true underlying improvement in the business. Most notably, e-commerce sales, which reflect our new online sales portal, achieved growth of 31% over the same period last year. As you may recall, as part of this strategy, we terminated our relationship with Henry Schein at the end of 2022, and terminated our remaining U.S. distributors in September 2023. As a result, we recorded no revenue for U.S. distributors for the three months ended March 31st, 2024, compared to approximately $219,000 for the three months ended March 31st, 2023. This deliberate shift to a direct sales model has resulted in improved growth margins, specifically Gross margin in the first quarter of 2024 increased to 74.5% from 72.7% for the same period last year. In addition to these higher margins, establishing a closer and more direct relationship with our dental customers has allowed us to do a much better job selling and providing outstanding customer service, which has led to much greater stickiness and potential repeat orders with existing clients. Specifically, this direct relationship also allows us to provide ongoing training and support to ensure continued usage by dentists and hygienists. For example, we have implemented educational programs to enhance the customer experience. In particular, we anticipate introducing an interactive digital learning platform targeted at dental teaching institutions, dentists, hygienists, international distributors, and international customers. This direct relationship has proven effective with individual practices, dental service organizations, also known as DSOs, and large group practices. The greater interaction and our ability to provide higher level support have helped attract premier customers. As an example, we commented direct sales of the SCA to Meridian Endo and Perio, a large endodontics, periodontics, and implant dentistry practice with three offices in Wisconsin. This includes the deployment of the SCA in each of their operatory rooms and across all the endodontists and periodontists within the practice. We also added Maine Dental Group, which operates 21 practices across the northeastern United States. As you can hopefully see, the new sales strategy within our dental segment has proven effective and we anticipate enhanced benefits from this transition to a direct model over the course of 2024. At the same time, we have engaged in more direct-to-consumer marketing or more direct-to-patient marketing. At the beginning of this year, we launched a digital marketing campaign simultaneously targeting dental clinics and patients By creating this push-pull, we have seen an increase in qualified leads resulting in higher conversion opportunities and thus more revenues. In other words, these activities have resulted in leads from dentists contacting us directly to order our instruments because patients requested them to do so. We will absolutely continue to increase our marketing efforts with dedicated campaigns directly targeted at patients. In summary, Through our direct sales model, in combination with enhanced education and targeted marketing campaigns, we continue to focus on new customer acquisition and development of the existing customer base. While international sales declined slightly, it's important to note that orders from third-party distributors can be lumpy due to the timing and size of orders, as well as certain distributors working through inventory. We also made the decision to pull back from China until market conditions improve. As previously disclosed, our focus in 2023 and early 2024 was on the domestic front. However, we have reinvigorated our international focus heading into 2024 and anticipate steady improvement this year. We also look forward to announcing the addition of new international partners, which should support our global expansion strategy over the coming quarters. we are expanding our efforts to enter new international markets and deepen our penetration with existing international markets. On a final note, we are on track with our next generation dental instruments and look forward to unveiling it in the near future. So to summarize, within our dental business, our e-commerce sales increased, we are benefiting from higher gross margins, and we continue to generate solid cash flow on a standalone basis. In fact, the dental division generated approximately $625,000 of operating income on a standalone basis in the first quarter of 2024. Through our new direct sales strategy and increased marketing efforts, we aim to further grow our dental business in the coming quarters. As we continue to grow our revenues, we expect to benefit from economies of scale as well as the recurring nature and high margins on our disposables. I'd now like to take a moment to turn to our medical segment where we are making significant process on the reimbursement front. But first, let me provide a recap of our overall strategy and execution. Specifically, we have continued to introduce the CompuFlow technology within prominent hospitals, healthcare systems, and pain management clinics. As an example, during the quarter, we commence sales, disposable sales, with PRC Alliance Pain Relief Center in Florida, which operates seven offices and an ambulatory surgical center located across central Florida with 15 providers. Adoption of the technology follows a successful evaluation by Dr. Sanjay Bakshi, a pain management physician and CEO of PRC Alliance Pain Relief Centers in Ormond Beach, Florida. Dr. Bakshi has been practicing for over 30 years and is triple board certified in anesthesia and pain management. Additionally, we commend sales of CompreFlow epidural disposables to Omaha Pain Physicians, a comprehensive medical pain management center in Omaha, Nebraska. This approval follows an extensive trial and evaluation by Dr. Matthew Stottle, its founder and medical director. Both of these rollouts followed successful evaluation periods and 100% clinical success with zero epidural punctures. The evaluations included epidural steroid injection procedures within the lumbar, thoracic, and cervical thoracic junction of the spine. While the addition of these clinics further validates our technology and strategy, demonstrating CompuFlow's clinical utility and benefit, we believe the true value lies in the support these and other clinics provide in advancing our broader reimbursement strategy. As more physicians and anesthesiologists perform procedures and submit for reimbursement, our goal is to secure broad coverage for our technology as we execute on our goal of establishing CompreFlow to become the standard of care in epidural analgesia. As I have discussed in the past, we have implemented a very strategic and targeted approach to securing reimbursement with Medicare, Medicaid, and private commercial payers. I'm pleased to report we are making significant process and progress in advancing this strategy. The first step in this approach was to work closely with key pain management providers in the use of the new CPT tracking code for accurate and timely CompuFlow claims submission. Additionally, we are providing support to the clinical facilities for each individual claim to have an appropriate response. We have established multiple sites across the U.S. that are actively utilizing CompuFlow and submitting claims to payers across the country. Rather than bringing on too many hospitals and pain clinics before reimbursement approval, we realized it is better to laser focus on working closely with a select group of pain clinics and provide them the necessary professional support. to help ensure positive payer reimbursement. We are also supporting these clinicians' utilization of CompreFlow across a variety of use cases, which is important in demonstrating widespread utilization of the technology. I'm pleased to report that we are effectively executing on this strategy, as evidenced by the fact we have now submitted more than 160 claims to pay assistance including a variety of Medicare jurisdictions using the specific CPT code, the 777T code. If you recall, the American Medical Association assigned this CPT code as an add-on code to be used in conjunction with one of the eight existing epidural steroid injection codes. And it is very specific to the unique computerized aspects of our technology. The high level of claim activity that is now being generated by us, provided us an opportunity to engage directly with the payers, including Medicare, to directly educate them on CompuFlow technology and the unmet need the technology serves. In turn, we believe this is helping build support for the appropriate level of reimbursement. As I mentioned, we are making significant process and progress and I look forward to providing further updates as developments unfold. We also believe there is a significant market opportunity for a CompuFlow epidural instrument within federal and other government agencies. And as we have discussed in the past, we are advancing initiative following the SAM approval and working to secure approval with FSS, the federal supply system. That would open up the sizable government market. Turning to the international front, we are expanding our network of distribution partners for CompuFlow. We are targeting independent distributors with existing relationships within key global markets and proven track records of introducing medical devices within their territories. We have also received preliminary indication that CompuFlow has received regulatory approval in one of the largest BRIC countries, and we expect to report on this further in the near future. In anticipation of this approval, we have already established key relationships with leading medical institutions and commercial entities in this country, which we look forward to formalizing in the near future. So to summarize, we are continuing our efforts to seed the market among key physicians and pain clinics across the U.S. which we believe will ultimately translate into broad adoption. We remain committed to our goal of establishing CompuClo as the new standard of care in epidural anesthesia by providing patients with effective pain relief while reducing the risk of complications. At this point, I'd like to turn the call over to Kisha Harkin, Vice President of Finance, to go over the financials in detail. Please go ahead, Kisha.