The following discussions of the financial condition and results of operations
should be read in conjunction with the financial statements and the notes to
those statements included elsewhere in this annual report. Certain statements in
this discussion and elsewhere in this report constitute forward-looking
statements, within the meaning of section 21E of the Exchange Act, that involve
risks and uncertainties. The actual results may differ materially from those
anticipated in these forward-looking statements. See “Risk Factors” elsewhere in
this Form 10-K.
OVERVIEW
that patents, designs, develops and commercializes innovative diagnostic and
therapeutic injection technologies and devices for medical, dental and cosmetic
use. Since our inception, we have engaged in pioneering proprietary, innovative,
computer-controlled injection technologies, and solutions for the medical and
dental markets. We believe our technologies are proven and well established. Our
common stock was initially listed on the NYSE American on
trades under the symbol “MLSS”.
We have focused our resources on redefining the worldwide standard of care for
injection techniques by making the experience more comfortable for the patient
by reducing the anxiety and stress of receiving injections from the healthcare
provider. Our computer-controlled injection devices make injections precise,
efficient, and virtually painless.
delivery device, using The Wand®, a single use disposable handpiece. The device
is marketed in dentistry under the trademark CompuDent®, and STA Single Tooth
Anesthesia System® and is suitable for all dental procedures that require local
anesthetic. Our proprietary DPS Dynamic Pressure Sensing technology® is our
technology platform that advances the development of next-generation devices. It
regulates flow rate and monitoring pressure from the tip of the needle, through
platform extensions for local anesthesia for subcutaneous drug delivery, used in
various dental and medical injections. It has specific medical applications for
cosmetic botulinum toxin injections, epidural space identification in regional
anesthesia procedures and intra-articular joint injections.
following three primary objectives:
? Establishing Milestone's DPS Dynamic Pressure Sensing technology platform as
the standard-of-care in painless and precise drug delivery, providing for the
first time, objective visual and audible in-tissue pressure feedback, and
continuing to expand platform applications;
? Following obtaining successful FDA clearance of our first medical device,
Milestone Scientific is transitioning from a research and development
organization to a commercially focused medical device company; and
? Expanding our global footprint of our CompuFlo Epidural and CathCheck System
by utilizing a direct field sales force and partnering with distribution
companies worldwide.
Because of combining the ability to regulate the flow rate and monitor pressure
at the tip of the needle,
solution for painlessly administering an intra-ligamentary injection, i.e.,
“single-tooth anesthesia” which could be used as the only injection necessary
for achieving dental anesthesia, foregoing the need to administer traditional
injections such as a nerve branch block. In addition to single-tooth anesthesia,
the STA System can effectively perform all the traditional injections that
dentists routinely give but can provide them virtually pain free and with
numerous clinical advantages. This device, which also utilizes a disposable
handpiece, is currently marketed by
System.
for dental injections. Our dental devices have been used to administer tens of
millions of injections worldwide. Each of our devices has a related single use
disposable handpiece, leading to a continuing revenue stream following sale of
the device. At present, we sell disposable handpieces unique to our legacy
product (the Wand and CompuDent) to users who have not upgraded to our current
dental product, the Wand STA System.
Building on the success of our proprietary, core technology platform for dental
injections, and desiring to pursue other growth opportunities, we have recently
begun to expand the uses and applications of our proprietary, patented
technologies to achieve greater operational efficiencies, enhanced patient
safety and therapeutic adherence, patient satisfaction, and improved quality of
care across a broad range of medical specialties. In
regulatory clearance to sell the CompuFlo Epidural Computer Controlled
Anesthesia System in
intend to continue to expand the uses and applications of our DPS Dynamic
Pressure Sensing technology.
25
——————————————————————————–
We believe that we and our technology solutions are widely recognized by key
opinion leaders (i.e., academics, anesthesiologists and practicing dentists
whose opinions are widely respected), industry experts and medical and dental
practitioners as a leader in the emerging, computer-controlled injection
industry.
Wand STA Dental Market
Since its market introduction in early 2007, the Wand STA System and prior
C-CLAD devices have been used to deliver over 80 million safe, effective, and
comfortable injections. The instrument has also been favorably evaluated in
numerous peer-reviewed, published clinical studies and associated articles.
Moreover, there appears to be a growing consensus among users that the STA
Instrument is proving to be a valuable and beneficial instrument that is
positively impacting the practice of dentistry worldwide.
Beginning
distribution agreement with Henry Schein, Inc. (“Henry Schein”). In
that agreement was replaced with an exclusive distribution arrangement for our
dental products for
2020
a non-exclusive distribution arrangement, for distribution in
and
In
distribution arrangements with dental distributors in specific geographical
locations in
non-exclusive dental distributors engaged in
goal is to add not only additional non-exclusive distributors in
States
Service Organization
specific dental market segments.
The goal of changing our marketing plan from a sole exclusive distributor in the
placement of our Wand STA System and thus the expansion of our dental
disposables.
On the global front, we have granted exclusive marketing and distribution rights
for the Wand STA System to select dental suppliers in various international
regions in
Stomatologii in
current international distributors and adding new distributors, globally as
required based on the economics of the region.
Medical Market
During 2016,
injections with the CompuFlo Epidural System. In
the CompuFlo Epidural System for epidural injections. During the end of the
second quarter 2021,
thus building up a stronger direct sales force aiming at increasing the adoption
and penetration of its technology. At the beginning of the year
Scientific
direct sales force consisting of eleven full time employees covering the US
North and Southeast regions along with
continues to partner with distributors for the international markets
In
510(k)-application submitted for intra-articular injections, we did not
adequately document that the device met the equivalency standard required for
510(k) clearances. Following consultation with the
Evaluation
However, due to financing constraints, a new 510(k) application was not filed in
2019. The Company has decided not to proceed with securing FDA approval for the
intra-articular instrument at the present time.
In
integrated the new CathCheck™ feature into the CompuFlo® Epidural System. Using
CathCheck, physicians and nurses can now monitor the placement of a catheter to
determine the presence or absence of a pulsatile waveform (heartbeat), providing
new information that can be used to determine if the catheter is in place or has
become dislodged from the epidural space. This can be performed within seconds
by measuring the pulsatile waveform within the epidural space.
In
with Premier Inc., a leading healthcare improvement company. The Agreement,
which became effective
discretion, to take advantage of special pricing and terms pre-negotiated by
Premier for the CompuFlo Epidural System and CathCheck. This agreement expires
on
signed in
on
26
——————————————————————————–
The following table shows a breakdown of
(net), domestically and internationally, by business segment product category:
For the Year December 31, 2021
Domestic: US Dental Medical Grand Total
Instruments $ 560,424 $ - $ 560,424
Handpieces 2,905,354 35,200 2,940,554
Accessories 69,271 1,300 70,571
Grand Total $ 3,535,049 $ 36,500 $ 3,571,549
International: Rest of World Dental Medical Grand Total
Instruments $ 1,226,486 $ 70,000 $ 1,296,486
Handpieces 3,246,302 44,900 3,291,202
Accessories 46,546 800 47,346
Grand Total $ 4,519,334 $ 115,700 $ 4,635,034
International: China Dental Medical Grand Total
Instruments $ 303,000 $ - $ 303,000
Handpieces 1,795,128 - 1,795,128
Accessories - - -
Grand Total $ 2,098,128 $ - $ 2,098,128
Total Product Sales $ 10,152,511 $ 152,200 $ 10,304,711
For the Year December 31, 2020
Domestic: US Dental Medical Grand Total
Instruments $ 191,133 $ - $ 191,133
Handpieces 1,877,039 2,000 1,879,039
Accessories 50,014 - 50,014
Grand Total $ 2,118,186 $ 2,000 $ 2,120,186
International: Rest of World Dental Medical Grand Total
Instruments $ 803,190 $ 7,600 $ 810,790
Handpieces 2,373,736 6,200 2,379,936
Accessories 48,924 - 48,924
Grand Total $ 3,225,850 $ 13,800 $ 3,239,650
International: China Dental Medical Grand Total
Instruments $ 75,000 $ - $ 75,000
Handpieces - - -
Accessories 2,400 - 2,400
Grand Total $ 77,400 $ - $ 77,400
Total Product Sales $ 5,421,436 $ 15,800 $ 5,437,236
Current Product Platform
27
——————————————————————————–
See Item 1. Description of Business.
Summary of Critical Accounting Policies and Significant Judgments and Estimates
The preparation of these consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis,
including those related to accounts receivable, inventories, stock-based
compensation, and contingencies.
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not clear from other sources. Actual results may differ from those estimates
under different assumptions or conditions.
While significant accounting policies are more fully described in Note C to the
consolidated financial statements included elsewhere in this report,
Scientific
judgment and estimates are most critical in understanding and evaluating the
reported financial results.
Principles of Consolidation
results of operations is based upon its consolidated financial statements that
have been prepared in accordance with accounting principles generally accepted
in
and its wholly-owned and majority-owned subsidiaries including, Wand Dental, and
Milestone Medical. All significant, intra-entity transactions and balances are
eliminated in the consolidation.
Variable Interest Entities
A variable interest entity (“VIE”) is an entity that either (i) has insufficient
equity to permit the entity to finance its activities without additional
subordinated financial support or (ii) has equity investors who lack the
characteristics of a controlling financial interest. A VIE is consolidated by
its primary beneficiary. The primary beneficiary has both the power to direct
the activities that most significantly impact the entity’s economic performance
and the obligation to absorb losses or the right to receive benefits from the
entity that could potentially be significant to the VIE.
If
obligation to absorb losses or receive benefits,
consolidates the VIE as the primary beneficiary.
involvement constitutes power that is most significant to the entity when it has
unconstrained decision-making ability over key operational functions within the
entity.
in Milestone China, it considered the guidance in ASC 810, “Consolidation” as it
relates to determining whether Milestone China is a VIE and, if so, identifying
the primary beneficiary.
beneficiary of the VIE if it has both of the following characteristics:
? Power Criterion: The power to direct the activities that most significantly
impact the entity's economic performance; and
? Losses/Benefits Criterion: The obligation to absorb losses that could
potentially be significant or the right to receive benefits that could
potentially be significant to the VIE
most significantly impact Milestone China’s economics and, therefore, the power
criterion has not been met. Management placed the most weight on the
relationship and significance of activities of Milestone China to the CEO of
Milestone China who have the power to direct the activities that most
significantly impact the economic performance of Milestone China. Management has
concluded that
810. Accordingly, Milestone China has not been consolidated into the financial
statements of
See Note F.
28
——————————————————————————–
Assessment of our Ability to Continue as a Going Concern
In accordance with (“ASC”) 205-40, “Presentation of Financial Statements –
Going Concern”, the Company continually evaluates whether there are conditions
or events, considered in the aggregate, that raise substantial doubt about the
Company’s ability to continue as a going concern within one year after the date
that the consolidated financial statements are issued.
incurred operating losses and negative cash flows from operating activities in
virtually each year since its inception.
In the second quarter of 2020, the Company was successful in raising
approximately
needed for operating activities, the Company’s current cash and liquidity is
sufficient to finance the operating requirements for at least the next 12 months
from the filing date of this annual report.
Other Uncertainties
The coronavirus (COVID-19) that was reported to have surfaced in
has adversely impact our operations and those of our third-party partners. As
a result of the reduced hours and closings of dental offices throughout the
country and the rest of the world due to the continuing spread of COVID-19,
revenues for the years ended
affected.
There has been a slow pick up in dental instrument and disposable sell through
to dentists beginning in the third quarter. In addition, it is uncertain as to
what the effect will be on the anticipated commercialization of our CompuFlo
Epidural and CathCheck system as a medical device . The extent to which the
coronavirus impacts our operations, our third-party partners, the dental
offices and hospital operations and demand depends on future developments which
are still highly uncertain. Such future developments could have a material
adverse effect on our financial results and our ability to conduct business as
expected.
Accounts Receivable
to its major distributors.
ability or inability of its customers to make payments on amounts billed. Most
of credit sales are due within ninety days from invoicing.
Inventories
Inventories principally consist of finished goods and component parts stated at
the lower of cost (first-in, first-out method) or net realizable value.
Inventory quantities on hand are reviewed on a quarterly basis and a provision
for excess and obsolete inventory is recorded if required based on past and
expected future sales, potential technological obsolescence and product
expiration requirement and regulations.
Impairment of Long-Lived Assets
circumstances (i.e. a triggering event) indicate that the carrying amounts may
not be recoverable.
The Company’s impairment review process is based upon an estimate of future
undiscounted cash flow. Factors the Company considers that could trigger an
impairment review include the following:
• significant under performance relative to expected historical or projected
future operating results,
• significant changes in the manner of our use of the acquired assets or the
strategy for our overall business,
• significant negative industry or economic trends; and
• significant technological changes, which would render the technology obsolete
Recoverability of assets that will continue to be used in the Company’s
operations is measured by comparing the carrying value to the future net
undiscounted cash flows expected to be generated by the asset or asset group.
Future undiscounted cash flows include estimates of future revenues, driven by
market growth rates, and estimated future costs.
29
——————————————————————————–
Revenue Recognition
The Company recognizes revenue when its customer obtains control of promised
goods or services, in an amount that reflects the consideration which the
Company expects to receive in exchange for those goods or services. To perform
revenue recognition the Company performs the following five steps:
i. identification of the promised goods or services in the contract;
ii. determination of whether the promised goods or services are performance
obligations including whether they are distinct in the context of the
contract;
iii. measurement of the transaction price, including the constraint on variable
consideration;
iv. allocation of the transaction price to the performance obligations based on
estimated selling prices; and
v. recognition of revenue when (or as) the Company satisfies each performance
obligation. A performance obligation is a promise in a contract to transfer
a distinct good or service to the customer and is the unit of account in
ASC 606.
The Company derives its revenues from the sale of its products, primarily dental
instruments, handpieces, and other related products. The Company sells its
products through a global distribution network and that includes both exclusive
and non-exclusive distribution agreements with related and third parties.
Revenue from product sales is recognized upon transfer of control of a product
to a customer, generally upon date of shipment. For certain arrangements where
the shipping terms are FOB destination, revenue is recognized upon delivery. The
Company has no obligation on product sales for any installation, set-up, or
maintenance, these being the responsibility of the buyer.
only obligation after sale is the normal commercial warranty against
manufacturing defects if the alleged defective unit is returned within the
warranty period.
Results of Operations.
The following table sets forth the consolidated results of operations for the
year ended
2021 2020
Operating results:
Product sales, net $ 10,304,711 $ 5,437,236
Cost of products sold 3,992,811 1,815,924
Gross profit 6,311,900 3,621,312
Operating expenses:
Selling, general and administrative expenses 12,738,362 10,670,631
Research and development expenses 878,210 307,850
Depreciation and amortization expense 73,836 95,949
Total operating expenses 13,690,408 11,074,430
Loss from operations (7,378,508 ) (7,453,118 )
Other income, and interest expense net 502,076 64,306
Net loss (6,876,432 ) (7,388,812 )
Net loss attributable to noncontrolling interests 58,115 51,539
Net loss attributable to
30
——————————————————————————–
Cash flow: December 31, 2021 December 31, 2020 Net cash used in operating activities$ (4,017,581 ) $ (6,984,928 ) Net cash used in investing activities (15,189 ) (21,438 ) Net cash provided by financing activities 4,573,199 19,714,011
Year ended
Net sales for years ended
2021 2020 Change
Dental $ 10,152,511 $ 5,421,436 $ 4,731,075
Medical 152,200 15,800 $ 136,400
Total sales, net $ 10,304,711 $ 5,437,236 $ 4,867,475
Consolidated revenue for the years ended
approximately
the years ended
for the year ended
re-opening of dental offices throughout the country, and the rest of the world,
including China. Medical revenue increased approximately
ended
meetings at hospital and pain clinics by the direct sales force organization and
medical device distributors in European markets.
Gross Profit for years ended
2021 2020 Change
Dental $ 6,223,051 $ 3,656,522 $ 2,566,529
Medical 88,849 (35,210 ) $ 124,059
Total gross profit $ 6,311,900 $ 3,621,312 $ 2,690,588
Consolidated gross profit for the years ended
approximately 61% and 67%, respectively. The decreased in the gross profit is
due to the lower margin in sales to
freight cost due to importing delays from
Selling, general and administrative expenses for years endedDecember 31, 2021 , and 2020 were as follows: 2021 2020 Change Dental$ 2,946,108 $ 2,831,016 $ 115,092 Medical 4,106,689 2,993,563 1,113,126 Corporate 5,685,565 4,846,052 839,513 Total selling, general and administrative expenses$ 12,738,362 $ 10,670,631 $ 2,067,731
Consolidated selling, general and administrative expenses for the years ended
respectively. This increase of approximately
several areas. Employee salaries, and benefits expenses increased approximately
hired additional employees to work on the commercialization of the CompuFlo®
Epidural System. The Company’s trade shows, royalty, marketing, quality
control, and general expenses increased approximately
professional, and consulting expense decreased approximately
to the year ended
Research and Development for years endedDecember 31, 2021 and 2020 were as follows: 2021 2020 Change Dental$ 797,509 $ 303,945 $ 493,564 Medical 80,701 3,905 76,796 Corporate - - -
Total research and development
31
——————————————————————————–
Consolidated research and development expenses for the years ended
2021
increase of approximately
enhancements to the product line STA Single Tooth Anesthesia System.
Profit (Loss) from Operations for years endedDecember 31, 2021 and 2020 were as follows: 2021 2020 Change Dental$ 2,475,059 $ 817,355 $ 1,657,704 Medical (4,105,854 ) (3,338,411 ) (767,443 ) Corporate (5,747,713 ) (4,932,062 ) (815,651 ) Total loss from operations$ (7,378,508 ) $ (7,453,118 ) $ 74,610
The loss from operations was approximately
years ended
The decrease the result of increased in dental revenue, due to re-opening of
dental offices throughout the country, the rest of the world, including
expenses as discussed above.
Liquidity and Capital Resources
flows from operating activities since its inception.
actively pursuing the generation of positive cash flows from operating
activities through an increase in revenue from its dental business and the
medical business worldwide, and a reduction in operating expenses. On
31, 2021
twelve years ended
operating activities of approximately
million
Management believes that the Company has sufficient cash, along with the current
cash flow and support from the dental business to mitigate the expected selling
expenditures for commercialization of the Epidural medical device, as well as
other operating expenditures and planned new product development programs, over
the next twelve months from the filing date of this report. Dental offices in
COVID-19 volumes. For the medical sector, hospitals in
opening for elective procedures and as such we are looking for new and
innovative medical solutions. The positive movement in the hospitals will be a
beneficial step to our sales efforts for the epidural instrument.
Contractual Obligations
The impact of the consolidated contractual obligations at
expected on the liquidity and cash flows in future periods, is as follows:
Payments Due by Period
Less than 1
Total Year 1-3 Years 3-5 Years
Operating lease obligations $ 586,589 $ 90,537 $ 330,479 $ 165,573
Purchase obligations (1) $ 3,668,115 $ 3,668,115 $ - $ -
Total $ 4,254,704 $ 3,758,652 $ 330,479 $ 165,573
(1) Purchase obligations include agreements for the purchase of dental and
medical devices, including purchase obligations entered into post year end,
which will require payment in during the year ended 2022.
32
——————————————————————————–
Recent Accounting Pronouncements
See “Note C – Summary of Significant Accounting Policies” to the consolidated
financial statements for explanation of recent accounting pronouncements
impacting
© Edgar Online, source
https://www.marketscreener.com/quote/stock/MILESTONE-SCIENTIFIC-INC-22620971/news/MILESTONE-SCIENTIFIC-INC-Management-s-Discussion-and-Analysis-of-Financial-Condition-and-Results-o-39929851/