Milestone Scientific Inc.

Greetings. Welcome to the Milestone Scientific Second Quarter 2026 Financial Results and Business Update Conference Hall. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, James Carbonara,

Thank you, Operator. Before we begin, please note that today's call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our earnings release as well as our filings with the SEC, including our 2025 Form 10-K, for discussion of these risks. A replay of this call will be available shortly after its conclusion. With that, I'll turn the call over to our CEO, Eric Hines.

Thank you, James, and good morning, everybody. And thank you for joining our call today. Our second quarter results reflect continued execution of the strategy we laid out at the start of the year, discipline cost management, and focused investment in our highest growth opportunities. Total revenue for the second quarter was $2.8 million, an increase of 22% compared to the second quarter of 2025, bringing our first half revenue to $5 million, up nearly 10% year-over-year. Our base business performed very well, contributing $2.4 million in the quarter, further supported by approximately $500,000 in upside from international orders. In the medical business, CompuFlow continued to build momentum, with medical segment revenue growing 231% compared to the second quarter of last year. While medical is still growing from a small base, there is real validation of the technology's value proposition, and we continue to scale the copy bill flow advisor program launched in February, adding physician advisors and expanding procedural use across additional milestone administrative contractor jurisdictions and commercial payers. On the reimbursement front, our healthcare providers are actively submitting claims and have received favorable payment outcomes from Medicare and the Novitas and First Coast jurisdictions, as well as from commercial payers, which includes personal injury protection and workers' compensation plans. We currently have established $325 payments established under Novitas and First Coast fee schedules covering three regions and 13 states. And we're continuing to pursue the remaining max. Alongside our three distribution partners in these areas, we plan to begin launching direct sales efforts in each region starting immediately. We also achieved an important milestone third-party validation this quarter. following the publication of a peer-reviewed University of Texas Medical Branch study in operative neurosurgery, which associated CompuFlow guided epidural access during spinal cord stimulator implantation with a 91% reduction in the odds of composite complications. The compelling evidence reinforces CompuFlow's differentiated value proposition and supports growing physician acceptance and expanded utilization across critical spinal and epidural procedures including epidural steroid injections, spinal cord stimulator implantation, obstetric epidurals, thoracic and cervical epidurals, neuromodulation therapies, and surgical epidural anesthesia. CopyFlow has now been evaluated or utilized across more than 40 universities, academic medical centers, and teaching hospitals worldwide. Subsequent to quarter end, we expanded the addressable market for copy flow with a strategic distribution agreement with Red One Medical, an established federal healthcare distributor to bring copy flow to the U.S. Department of Veterans Affairs, Department of Defense, Defense Health Agency, Indian Health Services, and other federal healthcare organizations, systems that collectively serve more than 18 million enrolled veterans and military beneficiaries. We believe this partnership gives us an efficient pathway into one of the largest and most strategically important healthcare markets in the country. On the dental side, we signed a new national distribution partner to expand our sales network and complement our e-commerce business, and we continue to build on our international footprint with a recent registration approval in Uzbekistan and additional registrations targeted in Japan, Mexico, Turkey, and India in the coming quarters. We also launched the first phase of our AI strategy this quarter with the pilot review of Milo, our AI-enabled digital engagement platform at the Aspen 2026 Conference in Miami Beach. Milo is designed to answer product questions, provide educational information, support lead qualification, and connect healthcare professionals with our sales, clinical, and customer support teams, helping us engage prospective customers on their own time, which we believe unlocks a meaningful opportunity with small commercial teams. Aspen was also a strong showing commercially, generating more than 40 qualified leads, and it marked the launch of our hashtag NoWetTaps campaign, voting on the complication reduction data we're seeing with CompuFlow. In terms of governance, we strengthen our board of directors with Benedetta Casamento transitioning from chair to executive chair and the addition of two new independent directors, Greg Schilling and Kellyanne Olto, who bring additional healthcare, technology, finance, and governance expertise. Turning to our capital position, we continue to operate for the $2.51 million private placement we completed in April. We are not currently planning to raise additional capital and continue to evaluate incremental sources as our net operating loss carry forwards in R&D tax credits programs and remain focused on funding the business through the disciplined execution that was meaningfully narrowed our losses over the past year. We are reaffirming our 2026 guidance of $9.8 million to $10.2 million in total revenue, representing double-digit growth for the year, with CompuSol expected to grow at a faster rate than the overall business for the remainder of 2026. I do want to set expectations appropriately for the third quarter. Our second quarter benefited from two large international orders that we don't expect to occur in the third quarter, and the third quarter is typically a seasonally slower period for us given the summer months. Please keep that in mind as you model the quarter. That said, we expect our medical initiatives, including our expanding Medicare reimbursement footprint and the direct sales launch we are now making alongside our distribution partners, to continue building and to contribute more meaningfully to the second half of the year. And we'll provide more detail on the trajectory alongside of our third quarter results in November. I'll now turn the call over to Keisha to review our financials. Keisha?

Thank you, Eric, and good morning, everyone. For the three months ending June 30th, 2026, total revenue was $2.8 million compared to approximately $2.3 million for the same period in 2025, representing an increase of approximately $518,000, or 22%. The increase in total net sales was driven by the growth in the dental product sales and continuing early stage of adoption of commercialization of the company's medical products. Gross profit for the three months ending June 30, 2026 was $1.9 million compared to $1.6 million in the prior year period. Gross margin was 67.2% for the three months ending June 30, 2026 compared to 69.6% for the same period. The decrease in gross margin was primarily due to the product and customer mix and increased product costs, including tariffs imposed and certain import products and components. These cost pressures were partially offset by higher levels of sales during the current period. Operating expenses decreased by approximately a half a million or 4.2% to approximately 3 million for the three months ending June 30th, 2026, compared with the approximately 3.1 million for the three months ending June 30th, 2025. The decrease was primarily attributable to the lower quality and regulatory expenses, consulting, professional fees, research and development, rent, occupational costs, and other segments. Net loss was $1.1 million or negative one point per share compared to the net loss of $1.55. For the six months ending June 30, 2026 and 2025, the total revenue was $5 million and $4.6 million respectively. to increase a 447,000 or 9.8%. Growth profit for the six months ending June 30th, 2026 was 3.5 million or 69.4% revenue compared to 3.3 million or 71% of revenue. Operating expenses decreases by approximately 1.4 million or 20% to approximately 5.4 million for the six months ending June 30th, compared to the approximately $6.7 million for the six months ending June 30th, 2025. Net loss.

Is there any, Keisha?

Yeah, no. I'm sorry. The phone clicked. As of June 30th, The company had cash and cash equivalents of $2.1 million and working capital of $3.7 million and $466,000 in profitable outstanding debt. At this time, I'll turn it back over to Eric.

All right. Thanks, Keisha.

So, I want to first and foremost thank everyone who wished me my one-year anniversary date, which was August 1st of 2026. So, thank you to those who reached out to me. What I can say about the company is we are 180 degrees different than when I joined the company. And I say that since we've added a lot of great employees and doing a lot of great things and a lot of great programs that are in place. And I'll leave the group here with, first of all, thank you for being shareholders and thank you for being interested in Milestone and thank you for your support. But most of all, I think our best chapters are ahead of us. So thank you and we'll call over to questions at this point.

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Bruce Jackson with StoneX.

Hi, good morning. Thanks for taking my questions and congrats on the quarter. So, I just wanted to clarify from the press release, how many Macs do you currently have that have the reimbursing place and then do you anticipate adding any more and when?

So we have two MACs, which cover three jurisdictions and 13 states. So those are Novitas and Coast Coast, and we will be adding more MACs along the way. We're currently working very closely with Palmetto, and then we'll move, you know, to an extent westward and start to collect CGS and WPS and Meridian. So we've got two currently with three jurisdictions and 13 states, representing about 30% to 35% of the population.

Okay, great. And then I just want to be clear on the sales guide for the third quarter. So it's going to be down sequentially, but I'm just trying to kind of gauge how much it's going to be down from the second quarter.

Right now we're projecting, again, I would say in the range of 2.3 to 2.5 would be the range that I would provide. Okay.

Okay. And then the last question I want to ask was, in the press release you mentioned a study where use of CompuFlow reduced composite complications, which I thought was pretty interesting. Can you kind of discuss a little bit why that is?

Just because of the number of, you know, I guess sometimes posts that they have to do. So, for instance, the with the accuracy that we command with the CompuFlow, they can get much more precise as far as where they're doing the implant. And so a lot of times they'll have multiple sticks, if you will, that they have to go through with a traditional LOR syringe. And using CompuFlow within that study, they were able to reduce the missteps or the misplacement by significant amounts.

Okay, great. That's it for me. Thank you.

Your next question for today is from Tom McGovern with Maxim Group.

Hey, guys. Thank you for taking my question. Yeah, first question is on the advisor program. So as of the last update in 1Q, you guys reported eight active physician partners and you had six pending. I was just curious if you could give an update. I'm sorry if I missed it earlier, the prepared remarks. I'm just curious where that's at currently. We've added a few more.

I think we're up to maybe 10 or 11. We're not really actively adding more advisors at this point as we're focusing on the claim submission. The claim submission is really what drives the reimbursement. and now that we've completed that exercise to an extent with Novitas and First Coast, we're turning our jets to other MACs. So the advisory program was really put in place to get people using the product, to start submitting claims, to get feedback and to get the Medicare reimbursement back in place. Now we're moving into Palmetto and out west with a few of the other MACs that will start adding advisors out in those areas. So We're limited a little bit by the scale. We've only got a couple people working on the medical front right now. That's going to be changing here quite dramatically here in the next several weeks. But we're limited by the capacity of the staff.

Understood. I appreciate that, Tyler. Next question, again, back in one cue, you guys gave us some encouraging news with the digital marketing campaign. It had contributed to 20 to 30 leads per week. I was wondering if that run rate or that rate had sustained in Q2 and what your conversion rate on those leads from Q1 was.

Yeah, so the campaign has continued to do extremely well, getting anywhere between 150 to 200 leads per month. Again, we're sort of at a capacity situation where that's why we launched Milo, which is going to be the AI bot that helps sort of prosecute some of those leads while they're on the phone. and because we just don't have enough people to frankly follow up and so the leads continue to grow to a point that we need to add people to handle them. In fact, we're getting ready to bring on two additional people that all they will do is follow up on the leads because the campaigns have generated such demand that we need to find a better way to keep up with them. Milo is one of them and then resources are another. So as compared to the Q1 And then final question for me is just on the Red One Medical Distribution Agreement.

I'm just trying to understand a little bit about the structure. Are there any, you know, minimum purchase or stocking commitments through this agreement? And then, you know, if you're still working on sending out the first order, how does that contracting work between the DA and DOP? Is that all pre-approved, or are you guys going to have to, you know, maybe negotiate separate contracts with each channel, or with each sub-channel, rather? Okay.

It'll be on the price schedule. It'll be on the FSS schedule. And we're still working through that. So we've got the agreement in place with Red One. There's no minimum commitments. I mean, I think you probably know that they're a very recognized national brand in the veteran space. So we're already targeting business just out of the gate. But again, we're still waiting for some of the details to be added to the FSS schedule. And then once that's in place, everyone will buy off that schedule versus us having to go through negotiations with each of the individual agencies.

Sure. And just for our understanding, I understand that that can be a little bit of a drawn-out process as anything with the government. But just curious, internally, what are you guys looking at in terms of the timeline to kind of work through that initial – I guess like logistical or contracting push and then transition to orders.

Yeah, our goal is to be taking orders in Q4. Okay.

All right, I appreciate all that, Tyler. I'll hop out of here.

Your next question for today is from John Corb, a private investor.

Good morning. Good morning, Eric. Nice to be with you this morning. You said in your comments that this company is 180 degrees different than it was a year ago. Congratulations on your one year. Had you not said that, I certainly got that sense from reading the quarterly report that I just finished reading. It's without a doubt the most comprehensive and hopeful quarterly report I've ever read from Milestone. I really feel like we get some traction here with Milestone and your ability to grow this company is very hopeful for me. I have one question regarding Red Medical and any distributor. In the past, especially with the dental, distributors would be signed up and that's all they'd be is the distributor. Nothing happened. What does a distributor agreement, what do they do? Do they sell? Do they just facilitate? With any distributorship you have anywhere, domestically or internationally, what agreement do you have with them from them?

So we control the pricing with the distributors versus some other ways of going to market where they are allowed to discount up to a certain amount. So we want to make sure that we have cost control for, I guess, a starting point. And then they obviously get points on the sales. The distributors, the way that they'll work for us, for instance, in Florida, is they will act not only as, additional feet on the street, but they will also, you know, they've got a lot of technical expertise, right? So, again, we're a little bit constrained from a resource perspective, so the distributors will act as our clinical specialists in some cases, they'll act as our salespeople in some cases, and then we will have, you know, some sort of hunters in Florida, and then we will also have sort of a strategic rep that will sort of manage that whole group, right? So we'll have a, you know, Strong medical technology salesperson who will work with the distributors, work with the hunting team and sort of chase the business in, for instance, the state of Florida. Then we will sort of rinse and repeat and do that in New Jersey, Pennsylvania, and Texas here over the course of the next handful of months. So they really just serve as, and we'll have multiple distributors in each state. We're not going to just hang our hat on one single distributor. We may have two or three different distributors covering the different parts of Florida, west, east, and north Florida, for instance, and that gives us technical expertise, feet on the street, and then having a single point of contact or two that are actually milestone employees that are overseeing that and being compensated for the efficacy as well as their own sales.

Great. Thanks so much, Eric. Thank you very much and all the best going forward.

Thanks, John. Once again, if you would like to ask a question, please press star 1. Once again, if you would like to ask a question, please press star one.

Your next question for today is from Gary Carroll, a private investor.

Hey, Gary. Top of the morning. Boss, how are you doing? I'm doing good. I wish you'd quit getting me up so early for these calls, but I just want to say congratulations on where we are today versus where we are one year ago when you stepped into this mess. Sorry I missed your anniversary. I think I was too busy trying to recruit some reps for you, but at any rate, I think the report was fantastic. I think we're moving in the right direction. I think some investors that have been here a long time like myself, and I've gotten some feedback from other people saying, can you ask Eric to elaborate a little bit on where we are today versus where we are exactly two years ago at the ASP entity, by the way, when we first got Medicare approval. And the previous regime, I don't want to mention his name because I might get sick, took that and did nothing. So we got reimbursement, and we got no follow-through. and I think there's a big difference happening now because obviously we and you realize the importance that now that we have that we have to run with that code and start submitting and I know we already are submitting cases into First Coast here in Florida of course which is my location and my interest so do we actually have a group or some that group in Tampa I think we have some guys in Tampa that really helped us submit Resubmit the cases that we needed to get Evelyn to be able to get us back to where we are today that now we can run with the ball. So from your point of view, what's the difference? Because I know you've been here also during that time with Arjan. So where are we today in your mind versus where we were then? Because I think a lot of people want to know. We got it now. We're going to get this done. And can you shed a little light on where you think we're, you know, the difference?

Yes, I don't really know exactly what happened prior. I mean, I was a shareholder like all of us were back then, but I didn't pay too much attention, but I paid enough attention to understand that something didn't seem like it was going in the right direction. So I think the difference now is that we've sort of done it a little bit more systematically. So we've gone, I guess, a little bit, sometimes they say you've got to go slower to go faster. and I'm a big believer in that. And so we've put things in place as far as reimbursement teams to help the medical offices to prosecute the claims. That's a big help. And now we're putting a team in the state of Florida, which will be four or five people that are just solely going after the kind of people of business. and so on. Going full force and adding and adding Macs until we get, you know, show that we've had a lot of success in Florida. We'll obviously move into the Novitas region with Texas and Pennsylvania and New Jersey. But we're going to do it systematically. We're going to do it with the right programs in place to support the offices and the office managers. And so I think that's really just the, it's kind of subtle, but it's, you know, going a little bit slower to make sure that we can accelerate once we get to a critical mass.

Along that line, Eric, are we going to have specific people trained to go into, for instance, you know I'm down in southeast Florida. We're getting excited about getting this thing launched. Are we going to have a support person or people that will come in and train the office staff on how these claims have to be submitted? Because I think there has to be some justification, if I'm correct, on the doctor using the CompuFlow, for instance, in a very difficult cervical case. It's an elderly patient with a lot of arthritis. There has to be something that goes along with that claim, correct?

There does, right? I mean, it has to be coded properly, all the I's dotted and T's crossed. It's actually a really good idea. So I just wrote it down, providing some training. And we've got Evelyn and her entire group. She's with a new company called Avni Air. which has many, many resources and they spend their life in getting products approved and working through that process. So I jotted that down but I think it makes a lot of sense because we're doing a little bit of that but we probably need to do more.

Well, I think so because if we have the reps going in and they're getting the account and Doc wants to use it, he's excited, we get it in, we get an order, we start using it. Well, if that rep has to stop then and take time to go train the office staff or the billing people, that's going to slow down the process of the sales process. So if we have that backup of somebody supporting us with what you just said, the billing and claims and training those people, first of all, they're going to get paid a lot quicker and they're going to submit it correctly and we're going to get what we need as far as the tracking for these cases to be tracked.

We're on the same page.

I think that's... I had something else to ask you, but... We've got a group in Tampa. Those guys that helped us are still submitting, correct? We've still got users, regular users that helped us get through that are still submitting cases. Yes. That's important, right?

We've got to keep it flowing. No doubt.

On that $500,000 international order, was that a big dental order that came in, by the way?

Yes. Yes.

Okay, so we're not really planning on that recurring for this quarter as you just stated.

Not at this point, no.

All right, well, I know it's going to be 9 o'clock here. Now listen, congratulations again. I think a lot of us, most of us are very excited that your progress, I think you're putting a good team together. Jason, Josh, they're working hard. Josh is doing a great job down in Florida. I think we might have somebody new down in Florida soon according to What I'm hearing, which will be fantastic to get us rolling, you know this is the biggest territory in the country, buddy. So we can get this going. I think we're going to be in good shape.

We appreciate your support, Gary.

All right, pal. Thank you. Yes.

We have reached the end of the question and answer session, and I will now turn the call over to Eric Hines for closing remarks.

Once again, thanks, everybody. It was a good quarter. We plan on having more good quarters. That's the plan. And I can't thank you enough for your support along the way. And we will be in touch. Thank you. Have a good day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.