What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-16 compared with 2020-08-14 · 75 added, 59 removed, 148 unchanged (48% of the section changed)

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In June 2017, the FDA approved our 510(k) applications for marketing clearance in the United States of our CompuFlo Epidural Computer Controlled Anesthesia System.

We are in the process of meeting with medical device distributors within the United States and Europe.

We are in the process of meeting with medical facilities and device distributors within the United States and Europe.

There have been five medical instruments sold in the United States in 2018 and limited amounts sold internationally as of the reporting date.

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Following obtaining successful FDA clearance of our first medical devices, Milestone Scientific is transitioning from a research and development organization to a commercially focused medical device company;

Expanding our global footprint of our CompuFlo Epidural System by partnering with distribution companies worldwide;

Expanding our global footprint of our CompuFlo Epidural and CathCheck System by utilizing a Direct Field Sales Force and partnering with distribution companies worldwide;

Continuing the development of our proprietary cosmetic injection device for delivery of botulinum toxin (such as Botox® and Dysport®)

Wand/STA Dental Market

Since its market introduction in early 2007, the Wand/STA Instrument and prior C-CLAD products have been used to deliver over 66 million safe, effective, and comfortable injections.

Since its market introduction in early 2007, the Wand/STA Instrument 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.

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Under this arrangement we have a semi-dedicated independent sales force visiting dentists.

The Company’s exclusive agreement is subject to annual purchase requirements and other requirements, as defined in the agreement.`

To date, Henry Schein has endeavored to accomplish the goals set forth in the exclusive distribution agreement for The Wand STA instrument and handpieces, including training of its exclusive products sale’s specialists.

Specifically, up to 25 exclusive product sales specialists have now been fully trained as experts in the features, advantages and benefits of The Wand/ STA instrument and handpieces and all are currently in the field selling the instrument.

Henry Schein increased the number of exclusive product specialist in 2019 and trained an additional customer service representative to support dentists across North America through its exclusive product sales customer call center, as business volume increases.

During the Covid-19 Pandemic, Henry Schein has lost one of its exclusive product specialist.

Henry Schein is in the process of recruiting additional specialist in the fourth quarter of 2020.

On the global front, we have granted exclusive marketing and distribution rights for the Wand/STA Instrument to select dental suppliers in various international regions in Asia, Africa, South America, and Europe.

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Medical Market

In September 2014, Milestone Medical received CE clearance to distribute their epidural and intra-articular instruments in the European Community (EU).

Milestone Medical signed a distribution agreement in March 2015 with a medical distributor in Poland for the distribution of the epidural instrument.

This distribution agreement was terminated in late 2016 due to the distributor’s inadequate performance under the distribution agreement.

Milestone Medical is continuing to pursue distributors for the instrument in the EU community.

During 2016, Milestone Scientific filed for 510(k) marketing clearance with the U.S.

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The expanded agreement allows 3B Scientific to capitalize on momentum from strong interest in the CompuFlo Trainer at its unveiling at Euroanesthesia 2019 and the Association of Women's Health, Obstetric and Neonatal Nurses meeting, and gives more anesthesia instructors the ultimate solution to accelerate the epidural procedure's learning curve and trainee success.

On April 21, 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 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.

On October 13, 2020, Milestone Scientific announced a Group Purchasing Agreement with Premier a leading healthcare improvement company, utilizing an alliance of approximately 4,100 U.S.

hospitals and 200,000 other providers to transform healthcare.

The Agreement, which became effective November 1, 2020, allows Premier members, at their discretion, to take advantage of special pricing and terms pre-negotiated by Premier for the CompuFlo® Epidural System and CathCheck™.

This agreement expires on February 28, 2022.

Covid-19 Pandemic

While the COVID-19 pandemic did not materially adversely affect the Company’s financial results and business operations in the Company’s first fiscal quarter ended March 31, 2020, economic and health conditions in the United States and across most of the globe have changed rapidly since the end of the first quarter.

In the short-term, demand for the Company’s products has decreased, notably in our dental and medical divisions.

In the short-term, demand for the Company’s products decreased, notably in our dental and medical divisions.

Such decrease demand may or may not continue and/or demand may or may not increase from historical levels depending on the duration and severity of the COVID-19 pandemic, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties.

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Further, our management team is focused on mitigating the adverse effects of the COVID-19 pandemic, which has required and will continue to require a large investment of time and resources across the entire Company, thereby diverting their attention from other priorities that existed prior to the outbreak of the pandemic.

If these conditions worsen, or last for an extended period of time, the Company’s ability to manage its business may be impaired, and operational risks, cybersecurity risks and other risks facing the Company even prior to the pandemic may be elevated.

The COVID-19 pandemic is affecting the Company’s customers, suppliers, vendors, and other business partners, but the Company is not able to assess the full extent of the current impact nor predict the ultimate consequences that will result therefrom.

The COVID-19 pandemic is affecting the Company’s operations in the second quarter and may continue to do so indefinitely thereafter.

The COVID-19 pandemic is affecting the Company’s customers, suppliers, vendors, and other business partners, but the Company is not able to predict the ultimate consequences that will result therefrom.

The COVID-19 pandemic did affect the Company’s operations in the second and third quarters and may continue to do so indefinitely thereafter.

All of these factors may have far reaching impacts on the Company’s business, operations, and financial results and conditions, directly and indirectly, including without limitation impacts on the health of the Company’s management and employees, manufacturing, distribution, marketing and sales operations, customer and consumer behaviors, and on the overall economy.

The scope and nature of these impacts, most of which are beyond the Company’s control, continue to evolve and the outcomes are uncertain.

Due to the above circumstances and as described generally in this Form 10-Q, the Company’s results of operations for the three and six month period ended June 30, 2020 are not necessarily indicative of the results to be expected for the full fiscal year.

Management cannot predict the full impact of the COVID-19 pandemic on the Company’s sales channels, supply chain, manufacturing, and distribution nor to economic conditions generally, including the effects on consumer spending.

The ultimate extent of the effects of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments, and such effects could exist for an extended period of time even after the pandemic might end.

Due to the above circumstances and as described generally in this Form 10-Q, the Company’s results of operations for the three- and nine month period ended September 30, 2020 are not necessarily indicative of the results to be expected for the full fiscal year.

The following table shows a breakdown of Milestone Scientific’s product sales (net), domestically and internationally, by business segment product category:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30

Total Domestic US

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Results of Operations

The following table sets forth the consolidated results of operations for the three months ended June 30, 2020 and 2019, respectively.

The following table sets forth the consolidated results of operations for the three months ended September 30, 2020 and 2019, respectively.

The trends suggested by this table may not be indicative of future operating results:

Three months Ended June 30,

Three months ended September 30,

Operating results:

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Net loss attributable to Milestone Scientific Inc.

The following table sets forth the consolidated results of operations for the six months ended June 30, 2020 and 2019, respectively.

The following table sets forth the consolidated results of operations for the nine months ended September 30, 2020 and 2019, respectively.

The trends suggested by this table may not be indicative of future operating results:

Six months ended June 30,

Nine months ended September 30,

Operating results:

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Net loss attributable to Milestone Scientific Inc.

June 30, 2019

September 30, 2020

September 30, 2019

Net cash used in operating activities

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Net cash provided by financing activities

Three months ended June 30, 2020 compared three months ended June 30, 2019

Three months ended September 30, 2020 compared three months ended September 30, 2020

Net sales for 2020 and 2019 were as follows:

Increase Decrease

Total sales, net

Consolidated revenue for the three months ended, June 30, 2020 and 2019 were approximately $167,000 and $2.2 million, respectively.

Dental revenue for the three months ended, June 30, 2020 and 2019 were approximately $166,000 and $2.2 million, respectively.

Dental revenues decreased by approximately $2.1 million, which is related to COVID-19 pandemic affecting the Company’s customers, suppliers, vendors, and other business partners.

In the short-term, demand for the Company’s products has decreased, notably in our dental divisions.

Consolidated revenue for the three months ended, September 30, 2020 and 2019 were approximately $1.2 million and $1.9 million, respectively.

Dental revenue for the three months ended September 30, 2020 and 2019 were approximately $1.2 and $1.9 million, respectively.

Dental revenues decreased by approximately $644,000 which is related to COVID-19 pandemic affecting the Company’s customers, suppliers, vendors, and other business partners.

In the short-term, demand for the Company’s products decreased, notably in our dental divisions.

Such decreased demand may or may not continue and/or demand may or may not increase from historical levels depending on the duration and severity of the COVID-19 pandemic, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties.

The majority of our office and management personnel are working remotely.

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, our revenue for the second quarter was, and possibly the third quarter, will be materially and adversely affected.

At this point in time, it is too early to determine an estimate of what the third quarter impact will be, or the effect COVID-19 may have on our fourth quarter revenue.

In addition, it is too early to determine what the effect will be on the anticipated commercialization of our CompuFlo Epidural system as a medical device in 2020

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, our revenue for the third quarter was materially and adversely affected.

At this point in time, it is too early to determine an estimate of what the fourth quarter impact will be, or the effect COVID-19 may have on our fourth quarter revenue.

In addition, it is too early to determine what the effect will be on the anticipated commercialization of our CompuFlo Epidural system as a medical device for the remainder of 2020, and the first quarter of 2021.

Gross Profit for 2020 and 2019 were as follows:

Increase Decrease

Total gross profit

Consolidated gross profit for the three months ended June 30, 2020 and 2019 approximately 67% and 68%, respectively.

Consolidated gross profit for the three months ended September 30, 2020 and 2019 approximately 67% and 72%, respectively.

Selling, general and administrative expenses for 2020 and 2019 were as follows:

Increase Decrease

Total selling, general and administrative expenses

Consolidated selling, general and administrative expenses for the three months ended June 30, 2020 and 2019, were approximately $3.1 million and $2.5 million, respectively.

The increase of approximately $658,000 is categorized in several areas.

Employee salaries, and benefits expenses increased approximately $256,000 during the three months ended June 30, 2020, the Company hired additional employees to work on the commercialization of the CompuFl o® Epidural System.

The company incurred an expense of approximately $370,000 related to a settlement with United Systems, see Note 6.

Consolidated selling, general and administrative expenses for the three months ended September 30, 2020 and 2019, were approximately $2.2 million and $2.3 million, respectively.

The decrease of approximately $16,000 is categorized in several areas.

Employee salaries, and benefits expenses increased approximately $154,000 during the three months ended September 30, 2020, as the Company hired additional employees to work on the commercialization of the CompuFl o® Epidural System.

During the three months ended September 30, 2020 D&O insurance increased approximately $54,000 due to the increase of premiums.

Due to Covid-19 Pandemic, the Company's travel expenses, trade shows, professional fees, quality control, and general expenses decreased approximately $275,000 while marketing and consulting expense increased approximately $43,000 for three months ended September 30 ,2020.

Research and Development for 2020 and 2019 were as follows:

Increase Decrease

Total research and development

Consolidated research and development expenses for the three months ended, 2020 and 2019, were approximately $21,000 and $7,900, respectively.

The increase is due to upgrades and enhancement of the CompuFlo ® Epidural System and handpieces.

The increase is associated with the Company developing software upgrades and enhancement for the CompuFlo ® Epidural System and handpieces.

Profit (Loss) from Operations for 2020 and 2019 were as follows:

Increase Decrease

Total loss from operations

The loss from operations was approximately $3.1 million and $1.1 million for the three months ending June 30, 2020 and 2019, respectively.

The increase loss is the result decreased in dental revenue, of the reduced hours and closings of dental and medical offices throughout the country and the rest of the world due to the continuing spread of COVID-19, we anticipate that our revenue for the third quarter, and possibly the fourth quarter, will be materially and adversely affected.

Six months ended June 30, 2020 compared to Six months ended June 30, 2019

The loss from operations was approximately $1.5 million and $1 million for the three months ending September 30, 2020 and 2019, respectively.

The increase is the result of decreased dental revenue, due to reduced hours and closings of dental and medical offices throughout the country and the rest of the world due to the continuing spread of COVID-19.

We anticipate that our revenue for the fourth quarter, and possibly the first quarter of 2021, will be materially and adversely affected.

Nine months ended September 30, 2020 compared to nine months ended September 30, 2019

Net sales for 2020 and 2019 were as follows:

Increase Decrease

Total sales, net

Consolidated revenue for the six months ended June 30, 2020 and 2019 were approximately $1.9 million and $4.1 million, respectively.

Dental revenue for the six months ended June 30, 2020 and 2019 were approximately $2 million and $4.2 million, respectively.

Dental revenues decreased by approximately $2.1 million, which is related to COVID-19 pandemic affecting the Company’s customers and other business partners.

Consolidated revenue for the nine months ended September 30, 2020 and 2019 were approximately $3.2 million and $6.1 million, respectively.

Dental revenue for the nine months ended September 30, 2020 and 2019 were approximately $3.2 million and $6.0 million, respectively.

Dental revenues decreased by approximately $2.8 million, which is mostly related to COVID-19 pandemic affecting the Company’s customers and other business partners.

In the short-term, demand for the Company’s products has decreased, notably in our dental and medical divisions.

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Such events may result in business and manufacturing disruption, inventory shortages, delivery delays, and reduced sales and operations, any of which could materially affect our business, financial condition, and results of operations.

The majority of our office and management personnel are working remotely.

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, our revenue for the second quarter was, and possibly the third and fourth quarters, will be materially and adversely affected.

At this point in time, it is too early to determine an estimate of what the third or fourth quarter impact will be, or the effect COVID-19 may have on our fourth quarter revenue.

In addition, it is too early to determine what the effect will be on the anticipated commercialization of our CompuFlo Epidural system as a medical device in 2020.

At this point in time, it is too early to determine an estimate of what the fourth quarter impact will be, or the effect COVID-19 may have on our first quarter of 2021.

In addition, it is too early to determine what the effect will be on the anticipated commercialization of our CompuFlo Epidural system as a medical device in the fourth quarter of 2020 and the first quarter 2021.

Gross Profit for 2020 and 2019 were as follows:

1 unchanged sentence

Total gross profit

Consolidated gross profit for the six months ended June 30, 2020 and 2019 approximately 71% and 68%, respectively.

Consolidated gross profit for the nine months ended September 30, 2020 and 2019 approximately 68% and 69%, respectively.

Selling, general and administrative expenses for 2020 and 2019 were as follows:

Increase Decrease

Total selling, general and administrative expenses

Consolidated selling, general and administrative expenses for the six months ended June 30, 2020 and 2019, were approximately $5.9 million and $4.6 million, respectively.

Consolidated selling, general and administrative expenses for the nine months ended September 30, 2020 and 2019, were approximately $8.2 million and 6.9 million, respectively.

The increase of approximately $1.3 million is categorized in several areas.

Employee salaries, bonuses and benefits expenses increased approximately $789,000 during the six months ended June 30, 2020, the Company hired additional employees to work on the commercialization of the CompuFlo® Epidural System.

The company expense approximately $370,000 of bad debt related to a settlement with United Systems, see Note 6.

Office expense increased approximately $143,000 for the relocation of the company office and other related costs.

Employee salaries, and benefits expenses increased approximately $1 million during the nine months ended September 30, 2020, the Company hired additional employees to work on the commercialization of the CompuFl o® Epidural System and recorded additional bonuses in 2020.

During the nine months ended September 30, 2020 D&O insurance increase approximately $117,000 due to the increase of premiums.

The company expenses approximately $370,000 of bad debt related to a settlement with United Systems, See Note 6.

Due to Covid-19 Pandemic, the Company's travel expenses, trade shows and general expenses decreased approximately $424,000.

Office expense increased approximately $143,000 associated with the relocation of the Company 's office and other related costs.

Research and Development for 2020 and 2019 were as follows:

Increase Decrease

Total research and development

Consolidated research and development expenses for the six months ended, June 30, 2020 and 2019, were approximately $215,000 and $102,000, respectively.

The increase is due to upgrades and enhancement of the CompuFlo® Epidural System and handpieces.

Consolidated research and development expenses for the nine months ended, September 30, 2020 and 2019, were approximately $237,000 and $109,000, respectively.

The increase is associated with the Company developing software upgrades and enhancement for the CompuFlo® Epidural System and disposables.

Profit (Loss) from Operations for 2020 and 2019 were as follows:

Increase Decrease

Total loss from operations

The loss from operations was approximately $4.7 million and $1.9 million for the six months ending June 30, 2020 and 2019, respectively an increase of approximately $2.8 million.

The loss from operations was approximately $6.3 million and $2.9 million for the nine months ending September 30, 2020 and 2019, respectively an increase of approximately $3.4 million.

This increase is the result of a decrease in revenues due to the reduced hours and closings of dental and medical offices throughout the country and the rest of the world due to the continuing spread of COVID-19.

We anticipate that our revenue for the third quarter, and possibly the fourth quarter, will be materially and adversely affected.

We anticipate that our revenue for the fourth quarter, and possibly the first quarter of 2021, will be materially and adversely affected.

Liquidity and Capital Resources

On June 30, 2020, Milestone Scientific had cash and cash equivalents of approximately $16.6 million and working capital of approximately $16.5 million versus working capital of $1.2 million on December 31, 2019.

For the six months ended June 30, 2020, we had negative cash flows from operating activities of approximately $4.2 million compared to $622,000 for the six months ended June 30, 2019.

On September 30, 2020, Milestone Scientific had cash and cash equivalents of approximately $14.4 million and working capital of approximately $15.4 million versus working capital of $1.2 million on December 31, 2019.

For the nine months ended September 30, 2020, we had negative cash flows from operating activities of approximately $6.3 million compared to $1.3 million for the nine months ended September 30, 2019.

In the second quarter of 2020 the Company completed two capital raises.

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The FDA clearance has provided the Company with the opportunity to establish distribution in the U.S.

The Company plans to restart the 510K application process for the intra-articular device later this year, subject to available internal resources.

The Company intends to restart the 510K application process for the intra-articular device , subject to available allocated internal resources.

Quantitative and Qualitative Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis