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 contained in this report and in connection with management's discussion and analysis and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended
December 31, 2021, which was filed with the Securities and Exchange Commission, or SECon March 31, 2022. 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. OVERVIEW Milestone Scientificis a biomedical technology research and development company 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 June 1, 2015and 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. Milestone Scientifichas developed a proprietary, computer-controlled anesthetic 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,
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,
Milestone Scientificdeveloped the industry's first 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 Milestone Scientificas the Wand STA® System. Milestone Scientificbelieves its dental devices have set a new standard of care 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 June 2017, we received FDA regulatory clearance to sell the CompuFlo Epidural Computer Controlled Anesthesia System in the United Statesfor certain medical applications. We intend to continue to expand the uses and applications of our DPS Dynamic Pressure Sensing technology. 24
-------------------------------------------------------------------------------- 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.
January 1, 2016, Milestone Scientificentered into a non-exclusive distribution agreement with Henry Schein, Inc. ("Henry Schein"). In June 2016, that agreement was replaced with an exclusive distribution arrangement for our dental products for the United Statesand Canadawith Henry Schein. In December 2020, the exclusive distribution arrangement with Henry Schein was replaced with a non-exclusive distribution arrangement, for distribution in the United Statesand Canada. In January 2021, the Company began a process of signing non-exclusive dental distribution arrangements with dental distributors in specific geographical locations in the United Statesand Canada. To date there are twelve new non-exclusive dental distributors engaged in the United Statesand Canada. The goal is to add not only additional non-exclusive distributors in the United States, but as well as exploring other co-operation opportunities with Dental Service Organization, education institutions, dental schools and entities in specific dental market segments. To date there are two of such channel partners in the United States. The goal of changing our marketing plan from a sole exclusive distributor in the USAand Canada, to a large number of non-exclusive distributors is to increase 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 Asia, Africa, South America, and Europe. They include FM Produkty Dla Stomatologii in Polandand Unident ABin the countries of Denmark, Sweden, Norway, and Iceland. Additionally, the Company is in the process of evaluating current international distributors and adding new distributors, globally as required based on the economics of the region. The Ukrainian-Russian conflict, sanctions imposed by the United Statesand other western democracies, and any expansion is likely to have unpredictable and wide-ranging effects on the domestic and global economy and financial markets, which could have an adverse effect on our business and results of operations. Already the conflict has caused market volatility, a sharp increase in certain commodity prices, such as wheat and oil, and an increasing number and frequency of cybersecurity threats. So far, we have experienced a decrease in international sales from Ukraineand halted all sales to Russia, a direct impact from the conflict. We will continue to monitor the situation carefully and, if necessary, take action to protect our business, operations and financial condition. Medical Market During 2016, Milestone Scientificfiled for 510(k) marketing clearance with the U.S. Food and Drug Administration(FDA) for both intra-articular and epidural injections with the CompuFlo Epidural System. In June 2017, the FDA approved the CompuFlo Epidural System for epidural injections. During the end of the second quarter 2021, Milestone Scientificinvested in sales force expansion, thus building up a stronger direct sales force aiming at increasing the adoption and penetration of its technology. At the beginning of the year Milestone Scientifichad three sales managers and by July 31, 2021had established a direct sales force consisting of eleven full time employees covering the US North and Southeast regions along with California. Milestone Scientificcontinues to partner with distributors for the international markets In December 2016, we received notification from the FDA that based upon the 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 FDA Office of Device Evaluation, we intended to file a new 510(k) application for the device in 2019. 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 April 2020, Milestone Scientific, announced that it has validated and 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 March 2022, the Company was notified by a territory manager, that Epidural Disposable Kit, Part # 6100-01, lot HC 51 potentially had an issue. The Company opened an investigation and decided to initiate a voluntary market withdrawal for the Epidural Disposable Kit, Part # 6100-01, lot HC 51. Management has determined that there are no potential impacts to patients or users. 25 --------------------------------------------------------------------------------
The following table shows a breakdown of
(net), domestically and internationally, by business segment product category:
March 31, 2022 March 31, 2021
Domestic: US Dental Medical Grand Total Dental Medical Grand Total
$ 122,968$ - $ 122,968 $ 176,016$ - $ 176,016Handpieces 795,859 7,550 803,409 794,984 8,150 803,134 Accessories 24,860 - 24,860 17,908 17,908 Grand Total $ 943,687 $ 7,550 $ 951,237$
of World Instruments
$ 453,560$ - $ 453,560 $ 383,255 $ 42,500 $ 425,755Handpieces 923,952 - 923,952 954,534 20,400 974,934 Accessories 12,189 - 12,189 20,560 20,560 Grand Total $ 1,389,701$ - $ 1,389,701 $ 1,358,349 $ 62,900 $ 1,421,249
ChinaInstruments $ - $ - $ - $ 150,000$ - $ 150,000Handpieces 359,964 - 359,964 356,400 - 356,400 Accessories - - - - - - Grand Total $ 359,964$ - $ 359,964 $ 506,400$ - $ 506,400
Total Product Sales
Current Product Platform
See Note 1, “Organization and Business”.
Results of Operations The following table sets forth the consolidated results of operations for the three months ended
March 31, 2022and 2021, respectively. The trends suggested by this table may not be indicative of future operating results: March 31, 2022 March 31, 2021 Operating results: Product sales, net $ 2,700,902 $ 2,924,707Cost of products sold 1,018,476 1,122,413 Gross profit 1,682,426 1,802,294 Operating expenses: Selling, general and administrative expenses 3,115,629 2,749,299 Research and development expenses 464,466 16,444 Depreciation and amortization expense 16,814 20,924 Total operating expenses 3,596,909 2,786,667 Loss from operations (1,914,483 ) (984,373 ) Other income, and interest expense net (4,742 ) (1,484 ) Net loss (1,919,225 ) (985,857 ) Net loss attributable to noncontrolling interests (17,502 ) (12,988 ) Net loss attributable to Milestone Scientific Inc. (1,901,723 ) (972,869 ) 26
Cash flow: March 31, 2022 March 31, 2021 Net cash used in operating activities
$ (1,507,508 ) $ (967,814 )Net cash used in investing activities - (5,916 ) Net cash (used in) provided by financing activities (2,063 ) 3,700,523
Three months ended
Net sales for 2022 and 2021 were as follows:
2022 2021 Change Dental
$ 2,693,352 $ 2,853,657 $ (160,305 )Medical 7,550 71,050 $ (63,500 )Total sales, net $ 2,700,902 $ 2,924,707 $ (223,805 )Consolidated revenue for the three months ended, March 31, 2022, and 2021 were approximately $2.7 millionand $2.9 million, respectively. Dental revenue decreased approximately $160,000for the three months ending March 31, 2022as compared to the three months ended March 31, 2021. Medical revenue decreased approximately $63,000for the three months ending March 31, 2022as compared to the three months ending March 31, 2021. 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 and thus influenced the obtained sales results of the three months ending March 2022.
Gross Profit for 2022 and 2021 were as follows:
2022 2021 Change Dental
$ 1,677,661 $ 1,759,682 $ (82,021 )Medical 4,765 42,612 $ (37,847 )Total gross profit $ 1,682,426 $ 1,802,294 $ (119,868 )
Consolidated gross profit for each of the three months ended
2021 was approximately 62%.
Selling, general and administrative expenses 2022 and 2021 were as follows:
2022 2021 Change Dental
$ 866,012 $ 631,882 $ 234,130Medical 1,231,886 918,098 313,788 Corporate 1,017,731 1,199,319 (181,588 ) Total selling, general and administrative expenses $ 3,115,629 $ 2,749,299 $ 366,330Consolidated selling, general and administrative expenses for the three months ended March 31, 2022and 2021, were approximately $3.1 million, and $2.7 millionrespectively. The increase of approximately $366,000is categorized in several areas. Employee salaries, and benefits expenses increased approximately $312,000during the three months ended March 31, 2022, as the Company hired additional employees to work on the commercialization of the CompuFlo® Epidural System. During the three months ended March 31, 2022, employee travel and other selling, general and administrative expenses increased approximately $145,000due to the re-opening of dental, and medical offices throughout the country, and the rest of the world. The Company's marketing, professional fees, and warehousing expenses decreased approximately $91,000for three months ended March 31, 2022.
Research and Development for 2022 and 2021 were as follows:
2022 2021 Change Dental
$ 456,516$ - $ 456,516Medical 7,950 16,444 (8,494 ) Corporate - - -
Total research and development
27 -------------------------------------------------------------------------------- Consolidated research and development expenses for the three months ended,
March 31, 2022and 2021, were approximately $464,000and $16,000, respectively. The increase of approximately $448,000is related to the Company exploring possible enhancements to the STA Single Tooth Anesthesia System product line .
Profit (Loss) from Operations for 2022 and 2021 were as follows:
2022 2021 Change Dental
$ 354,240 $ 1,126,069 $ (771,829 )Medical (1,236,091 ) (895,781 ) (340,310 ) Corporate (1,032,632 ) (1,214,661 ) 182,029 Total loss from operations $ (1,914,483 ) $ (984,373 ) $ (930,110 )The loss from operations was approximately $1.9 millionand $1 millionfor the three months ending March 31, 2022and 2021, respectively. The increase is related to decrease in revenue and gross profit, the Company incurred additional freight cost due to importing delays from China. and, an increase in selling, general and administrative expenses as discussed above.
Liquidity and Capital Resources
March 31, 2022, Milestone Scientifichad cash and cash equivalents of approximately $13.3 millionand working capital of approximately $14.4 millionversus working capital of $15.8 millionon December 31, 2021. For the three months ended March 31, 2022and 2021, we had cash flows used in operating activities of approximately $1.5 millionand $1 million, respectively. We believe our current cash on hand is sufficient to fund operations through 12 months from filing the unaudited condensed consolidated financial statements. Milestone Scientificis actively pursuing the generation of positive cash flows from operating activities through an increase in revenue from its dental business worldwide, the generation of revenue from its medical devices and disposables business in the United Statesand worldwide, as well as considering other strategic plans or transactions. Now that the CompuFlo Epidural System has obtained FDA clearance in the United States( June 2017), the development costs were reduced in 2020, but the selling costs are expected to continue to increase. The FDA clearance has provided the Company with the opportunity to establish distribution in the U.S.
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