Milestone Scientific Inc. (AMEX:MLSS) Q1 2024 Earnings Call Transcript

Milestone Scientific Inc. (AMEX:MLSS) Q1 2024 Earnings Call Transcript May 16, 2024

Operator: Good morning, everyone, and welcome to the Milestone Scientific Inc. First Quarter 2024 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode and we’ll open for questions following the presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, David Waldman, Cresendo Communications. The floor is yours.

David Waldman: Good morning, and thank you for joining Milestone Scientific’s first quarter 2024 financial results conference call. On the call with us today are Arjan Haverhals, Chief Executive Officer; and Keisha Harcum, Vice President, Finance of Milestone Scientific. The Company issued a press release this morning containing first quarter 2024 financial results, which is also posted on the Company’s website. If you have any questions after the call, would like any additional information about the Company, please contact Crescendo Communications at (212) 671-1020. The Company’s management will now provide prepared remarks reviewing the financial and operational results for quarter ended March 31, 2024. Before we get started, we’d like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of Milestone’s ability to implement its business plan, expected revenues and future success.

These statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond Milestone’s control. Some of the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are general economic conditions, failure to achieve expected revenue growth changes in our operating expenses and adverse patent rulings, FDA or legal developments, competitive pressures, changes in customer market requirements and standards and the risk factors detailed from time to time in Milestone’s periodic filings with the Securities and Exchange Commission, including without limitation, Milestone’s report on Form 10-K for the year ended December 31, 2023, milestones we report on Form 10-Q for the first quarter ended March 31, 2024.

The forward-looking statements made during this call are based upon management’s reasonable belief as of today’s date, May 16, 2024. Milestone undertakes no obligation to revise or update publicly any forward-looking statements for any reason. With that, we’ll now turn the call over to Arjan Haverhals, Chief Executive Officer. Please go ahead, Arjan.

Arjan Haverhals: Thank you, David, and thanks to everyone for joining us today. We achieved revenue of more than $2.2 million for the first quarter of 2024. Although our revenue was down slightly compared to the same period last year, this was largely a reflection of a reserve reversal in the first quarter of 2023. And coupled with a decline in international sales during the first quarter of 2024. However, these results do not reflect the true underlying improvement in the business. Most notably, e-commerce sales, which reflect our new online sales portal achieved growth of 31% over the same period last year. As you may recall, as part of this strategy, we terminated our relationship with Henry Schein at the end of 2022 and terminated our remaining U.S. distributors in September 2023.

As a result, we recorded no revenue for U.S. distributors for the three months ended March 31, 2024, compared to approximately $219,000 for the three months ended March 31, 2023. This deliberate shift to a direct sales model has resulted in improved gross margins. Specifically, gross margin in the first quarter of 2024 increased to 74.5% and from 72.7% for the same period last year. In addition to these higher margins, establishing a closer and more direct relationship with our dental customers, has allowed us to do a much better job selling and providing outstanding customer service, which has led to much greater stickiness and potential repeat orders with existing clients. Specifically, this direct relationship also allows us to provide ongoing training and support to ensure continued usage by dentists and hygienists, for example, we have implemented educational programs to enhance the customer experience.

In particular, we anticipate introducing an interactive digital learning platform targeted at dental teaching institutions, dentists, hygienists, international distributors and international customers. This direct relationship has proven effective with individual practices, dental service organizations, also known as DSOs and large group practices. The greater interaction and our ability to provide higher-level support have helped attract premier customers. As an example, we commented direct sales of the STA to Meridian Endo imperial, a large endodontics, periodontics and implant dentistry practice with three offices in Wisconsin. This includes the deployment of the STA in each of their operatory rooms and across all the endodontist and periodontist within the practice.

We also added Main Dental Group, which operates 21 practices across the Northeastern United States. As you can hopefully see the new sales strategy within our Dental segment has proven effective, and we anticipate enhanced benefits from this transition to a direct model over the course of 2024. At the same time, we have engaged in more core direct-to-consumer marketing or more direct-to-patient marketing. At the beginning of this year, we launched a digital marketing campaign simultaneously targeting dental clinics and patients. By creating this push pool, we have seen an increase in qualified leads resulting in higher conversion opportunities and thus more revenues. In other words, these activities have resulted in leads from dentists contacting us directly to order our instruments because patients requested them to do so.

We will absolutely continue to increase our marketing efforts with dedicated campaigns directly targeted at patients. In summary, through our direct sales model, in combination with enhanced education and targeted marketing campaigns, we continue to focus on new customer acquisition and development of the existing customer base. While international sales declined slightly, it’s important to note that orders from third-party distributors can be lumpy due to the timing and size of orders as well as certain distributors working through inventory. We also made a decision to pull back from China until market conditions improve. As previously disclosed, our focus in 2023 and early 2024 was on the domestic front. However, we have reinvigorated our international focus heading into 2024 and anticipate steady improvement this year.

We also look forward to announcing the addition of new international partners which should support our global expansion strategy over the coming quarters. We are expanding our efforts to enter new international markets and deepen our penetration with existing international markets. On a final note, we are on track with our next-generation dental instruments and look forward to unveiling it in the near future. So, to summarize, within our Dental business, our e-commerce sales increased. We are benefiting from higher gross margins, and we continue to generate solid cash flow on a stand-alone basis. In fact, the Dental division generated approximately $625,000 of operating income on a stand-alone basis in the first quarter of 2024. Through our new direct sales strategy and increased marketing efforts, we aim to further grow our Dental business in the coming quarters.

As we continue to grow our revenues, we expect to benefit from economies of scale as well as the recurring nature and high margins on our disposables. I’d now like to take a moment to turn to our Medical segment where we are making significant process on the reimbursement front. But first, let me provide a recap of our overall strategy and execution. Specifically, we have continued to introduce the CompuFlo technology within prominent hospitals, health care systems and pain management clinics. As an example, during the quarter, we commenced sales — disposable sales with PRC Alliance Pain Relief Center in Florida, which operates seven offices and an ambulatory surgical center located across Central Florida with 15 providers. Adoption of the technology follows a successful evaluation by Dr. Sanjay Bakshi, a pain management physician and CEO of PRC Alliance Pain Relief Center in Ormond Beach, Florida.

Dr. Bakshi has been practicing for over 30 years and is triple board certified in anesthesia and pain management. Additionally, we commenced sales of CompuFlo epidural disposables to Omaha Pain Physicians a comprehensive medical pain management center in Omaha, Nebraska. This approval follows an extensive trial and evaluation by Dr. Matthew Stottle, its Founder and Medical Director. Both of these rollouts followed successful evaluation periods and 100% clinical success with zero epidural punches. The evaluations included epidural steroid injection procedures within the lumbar, thoracic and cervical thoracic junction of the spine. While the addition of these clinics further validates our technology and strategy, demonstrating CompuFlo clinical utility and benefit.

We believe the true value lies in the support these and other clinics provide in advancing our broader reimbursement strategy. As more physicians and anesthesiologists perform procedures and submit for reimbursement, our goal is to secure broad coverage for our technology as we execute on our goal of establishing CompuFlo to become the standard of care in epidural analgesia. As I have discussed in the past, we have implemented a very strategic and targeted approach to securing reimbursement with Medicare, Medicaid and private commercial payers. I’m pleased to report we are making significant process and progress in advancing this strategy. The first step in this approach was to work closely with key pain management providers in the use of the new CPT tracking code for accurate and timely CompuFlo claims submission.

Additionally, we are providing support to the clinical facilities for each individual plan to have an appropriate response. We have established multiple sites across the U.S. that are actively utilizing CompuFlo and submitting claims to payers across the country, rather than bringing on too many hospitals and pain clinics before reimbursement approval. We realized it is better to laser focus on working closely with a select group of pain clinics and provide them the necessary professional support to help ensure positive payer reimbursement. We are also supporting these clinicians’ utilization of CompuFlo across a variety of use cases which is important in demonstrating widespread utilization of the technology. I’m pleased to report that we are effectively executing on this strategy as evidenced by the fact we have now submitted more than 160 claims to pay assist systems, including a variety of Medicare jurisdictions using the specific CPT code, the 777T code.

If you recall, the American Medical Association assigned this CPT code as an add-on code to be used in conjunction with one of the eight existing epidural steroid injection codes. And it is very specific to the unique computerized aspects of our technology. The high level of claim activity that is now being generated by us provided us an opportunity to engage directly with the payers, including Medicare to directly educate them on CompuFlo technology and the unmet need the technology serves. In turn, we believe this is helping build support for the appropriate level of reimbursement. As I mentioned, we are making significant process and progress, and I look forward to providing further updates as developments unfold. We also believe there is a significant market opportunity for our CompuFlo epidural instrument within federal and other government agencies.

And as we have discussed in the past, we are advancing initiatives following the SAM approval and working to secure approval with FSS, the federal supply system. That would open up the sizable government market. Turning to the international front. We are expanding our network of distribution partners for CompuFlo. We are targeting independent distributors with existing relationships within key global markets and proven track record of introducing medical devices within their territories. We have also received preliminary indication that CompuFlo has received regulatory approval in one of the largest BRIC countries, and we expect to report on this further in the near future. In anticipation of this approval, we have already established key relationships with leading medical institutions and commercial entities in this country, which we look forward to formalize in the near future.

So, to summarize, we are continuing our efforts to seize the market among key physicians and pain clinics across the U.S., which we believe will ultimately translate into growth adoption. We remain committed to our goal of establishing CompuFlo as the new standard of care in epidural anesthesia by providing patients with effective pain relief while reducing the risk of complications. At this point, I’d like to turn the call over to Keisha Harcum, Vice President of Finance, to go over the financials in detail. Please go ahead, Keisha.

Keisha Harcum: Thank you, Arjan. For the quarter ending March 31, 2024 and 2023, revenue was approximately $2.2 million and $2.6 million, respectively. As of January 3, 2023, the Company launched an e-commerce platform, selling and shipping the SDA, Single Tooth Anesthesia System and handpieces directly to end users, including dental office and dental groups to replace its previous U.S. distribution arrangements with Henry Schein. The U.S. E-commerce revenue for the three months ended March 31, 2024, was approximately $1.3 million compared to $989,000 at March 31, 2023. The Company recorded no revenue for other U.S. distributors for the three months ending March 31, 2024 compared to approximately $219,000 for the three months ending March 31, 2023.

The Company terminated all non-exclusive agreements with other distributors in the U.S. in September of 2023. For the three months ending March 31, 2024, international revenue was approximately $930,000, a decrease of $274,000 compared to March 31, 2023. Gross profit for the quarter ending March 31, 2024 was $1.7 million or 75% of revenue versus $1.9 million or 73% of revenue for the year ended — for the three months ending March 31, 2023. The increase in gross profit margin was due to higher margin sales with the launch of the new online store. Operating losses for the three months ending March 31, 2024, was approximately $1.5 million versus $1.3 million for the first quarter ending March 31, 2023. Net loss was approximately $1.4 million or $0.02 per share for the three months ending March 31, 2024, versus net loss of $1.3 million or $0.02 per share for the comparable period in 2023.

Now, I would like to turn your attention to liquidity and capital resources. We continue to carefully manage expenses to have maintained a solid balance sheet. At March 31, 2024, the Company had cash and cash flow closed and marketable securities of approximately $5 million, and working capital of $7.2 million and no long-term debt. At this point, I’ll turn the call back over to Arjan Haverhals.

Arjan Haverhals: Thank you, Keisha. As Keisha mentioned, we continue to maintain a strong balance sheet with approximately $5 million of cash, cash equivalents and marketable securities as of March 31, 2024, which we believe provides us sufficient resources to execute on our sales and marketing activities, around both our dental and medical instruments without the need for additional capital raise. We believe our new direct sales strategy, including the launch of our new online sales portal in the U.S. as well as our enhanced marketing efforts around the SDA have been effective, as illustrated by the increase in our e-commerce sales as well as the gross profit margin improvement during the quarter. Our dental business continues to generate positive cash flow on a stand-alone basis, and we remain focused on achieving our goal of positive cash flow company-wide.

On the medical side, we remain encouraged by the outlook for the business given our sales pipeline, the addition of new pain management clinics as well as expansion of our international distribution partners. Most importantly, we are making progress advancing our reimbursement strategy around the CompuFlo Epidural System and look forward to providing an update as developments unfold. The Medical segment represents a large addressable market, and we remain confident in our belief that CompuFlo will ultimately become the standard of care, given both the safety, predictability and efficiency advantages. So, to wrap up, we believe we have developed an efficient and scalable platform to help drive high-margin, recurring sales in the coming years and look forward to reporting further developments in the Medical segment on the reimbursement front.

At the same time, we have maintained a lean operating structure and remain committed to driving shareholder value. I’d like to thank you for joining the call today. And at this point, we would like to open the call up to questions. Operator?

Q&A Session

Operator: Thank you very much. We will now be conducting a question-and-answer session. [Operator Instructions] Your first question is coming from Anthony Vendetti of the Maxim Group. Anthony, your line is live.

Anthony Vendetti: So, Arjan, just on the on the 160 claims submitted so far to Medicare. Was that in the first quarter? Or is that year-to-date? And then, can you talk about what — how you think that’s going to grow throughout the year? Is there a pipeline of claims that you have? And then the additional pain clinics, I know you announced some — what’s that pipeline look like and the opportunity for the remainder of 2024?

Arjan Haverhals: Thank you, Anthony. So, to answer your question, first question was the number of sites or the number of claims that we have submitted. Just to recall, at the end of 2023, we had submitted in a nine-month period about 100 claims. We also explained what was happening to the letter of the shareholders in the beginning of the month of January. So, the 60 additional claims is from the period January until today, which is May 16, 2024. So those 160 claims, that means that patients have been treated with the technology, all the documentation that is needed for submissions to the health care insurance provider, including letter of medical necessity, et cetera, have been submitted to these health care insurance providers, including we can confirm that these claims have been uploaded in their system, which is very important.

Because uploading the claims means that there is evidence, and there is an identification of our technology for health care insurance providers. So that’s the first part of your question. The pipeline of claims — the pipeline of clinicians, like I said, we are laser focused. It’s not a matter of getting 20 or 30 more clinics that are sending in the claims. It is more important that we have sufficient and the smaller group of clinics where we are 100% sure that the document that is sending in and submitted to this health care insurance provider is professional, is correct and that we avoid back and forth with the discussion with the health care insurance providers to optimize the quality of the document patient. What is key to understand, it’s not so much of just doing the technology and treating the patient with the technology.

The main part of the effort made is, I would say, at the back end of this process where the billing and the coding manager of the office has to send it into the insurance provider. I’m quite sure that everybody from their own experience is aware of what kind of paperwork needs to be submitted to get even a payment from insurance providers. As we speak, yes, we are adding additional sites, additional clinics, additional hospitals that we are in discussion with and where we are going to perform first patients to further support the approval and the payment of the procedure by the reimbursement providers. Now what the outlook will be for the end of the year that is completely dependent on the feedback that we expect to receive from some of the jurisdictions that have already confirmed that there’s coverage of the technology, but they are in the process now to finally establish a pricing for their insurance for Medicare, in some of the jurisdictions for this technology as an add-on code in addition to the epidural steroid injection.

And that will, of course, trigger then a faster acceleration of commercialization of our CompuFlo Epidural System in the United States. So, does that answer your question, Anthony?

Anthony Vendetti: Yes. I was just wondering, for some of the claims that have been — that were submitted last year. What does the adjudication process look like so far? Has there been some price — some reimbursement established? Or is it too early to say at this point?

Arjan Haverhals: No. As I explained in the first quarter and in January, when you say reimbursement established means for us in our terminology, that means the Medicare has to establish a price for this technology, right? Now commercial payers, some of commercial payers have paid for this technology and the motor vehicle patients or the motor vehicle insurance has decided in some of the clinics here in New Jersey to pay for the specific motor vehicle cases. What is very important is to understand, in particular, why is Medicare important. Medicare is important because, in particular, our technology in the patient group of the Medicare insured patients will work very well because of the anatomy and the elderly patients’ calcifications.

And that is, in particular, part of the letter of medical necessity for the Medicare insurance provider that they understand what this technology is doing. Like I mentioned this morning that we are allowed to engage with the Medicare providers. Now yes, I have had with our medical adviser meeting with one of the jurisdictions to explain in detail what this technology is doing, what the benefit is for the patients, and which helps and support these jurisdictions to come with a pricing statement for our technology for the Medicare patients. When we get that, that would be in your terminology, the establishment of reimbursement.

Anthony Vendetti: Okay. And then maybe just explain the difference or the sales force difference between the dental business, which is now direct as you terminated the Henry Schein agreement, versus how you’re going about medical side for the CompuFlo System?

Arjan Haverhals: Well, I’m afraid I do not understand your question. But if the dental business, all the revenues are generated by the dental business year-to-date, 99.5% is dental sales. Your question about the dental business generating the revenues as we have reported, it’s $1.3 million on the e-commerce sales in the dental business in the U.S. alone versus I think about 89,000 in the same period last year. So that’s the 31%. And then, of course, the revenues that we are getting, including the profitability of the dental business, we use that money to further invest and help support the buildup of the medical business. The medical business revenue that we hope to enjoy within the year 2024 is strongly dependent on having reimbursement and getting the initial price indication and price positioning of the reimbursement and the health care insurance providers.

That’s exactly what we are doing and what the strategy has been. Look, we are living in an environment, in a health care environment where unfortunately, it is not sufficient if you have a new technology that is more efficient safer, more comfortable, higher predictability. At the end of the day, it completely depends on what the health care insurance providers are going to pay and reimburse, and establish that reimbursement for the patients and the clinicians right? So, what we are doing is building it up stage by stage, and step by step, as I’ve alluded on earlier, where we have identified last year, three jurisdictions that we are active in. This year, we have expanded the three jurisdictions to seven jurisdictions where we are currently in.

There are 12 jurisdictions in the United States. And the target is to be present in all those jurisdictions and the seven out of the 12 is in a way a confirmation that we are now present in about 60% to 65% of all the states in the United States. So, the game here is really to roll it out. Every jurisdiction has their own decision-making process. But when we get the establishment of the first jurisdictions in the United States, it will have an effect on the other jurisdictions for Medicare in other parts of the country in the U.S. That’s why it is so important. And that’s why I said, we have made significant process and progress because, yes, we have been able to engage with — in a meeting with one of these jurisdictions to explain in detail what this technology is about, what the benefits are, in particular, for the patient population.

And now we are waiting for their feedback. That is a pretty, pretty fantastic result, I would say, for the Company on our side. There are numerous companies that never ever get as far as we have been. So that’s the reason why I say significant progress, and that’s the reason also why I’m pretty positive that we will hear in short to midterm from these health care insurance jurisdictions, what that price is. I don’t have any influence on what the final price is going to be. I’m also not going to share which jurisdictions we have been in discussion with because I don’t want to jeopardize any of their decision-making process to come to a final price statement and pricing decision. But have we made progress? Absolutely. Am I happy? Absolutely, and I’m proud of what the team and this company has been doing as a smaller entity in this whole jungle of reimbursement and coding and getting that established.

So yes, I’m pretty positive.

Anthony Vendetti: Okay. Great. Just shifting gears to the Dental business. You were talking about e-commerce and then restarting the international. Is the restarting the international this year, already underway? And then, is there going to be an e-commerce model there as well?

Arjan Haverhals: Let me take the opportunity. I would like to correct your statement. It’s not a matter of restarting the international business. It’s not a matter that we have not focused on the international business. There has been good reasons why some of these distributors based on the inventory buildup or based on their quarterly purchase orders and forecasts, wide has not ordered the products in the first quarter, right? So, what I mean was that you know that we are having a rather lean organization also on the sell side. For the dental business, we have including myself, three people working directly with the sales and then three people in the back office from an education and a customer service, and a customer support point of view, focusing on the higher level of activity within the United States because we know now the customer identity, right?

Now on the international front, we have quarterly business meetings with the top 15 distributors, which is representing 90% of our dental business to really understand and work closely together with these distributors so that we can get a steady and a consistent solid baseline of business quarter-by-quarter. Because we are not in a business of seasonality. It completely depends on the book and the magnitude of the order, and we would like to spread that out overall the fourth quarter, so that we can come with a more efficient sales and operations planning with a more efficient management of sales efficiencies and sales execution. We will not, for the time being, we will not have an e-commerce platform for the international markets. And primarily based on language, based on different tax systems, based on different regulatory requirements within these countries, so we prefer to go through the distributors.

Now, the majority of these distributors do have their own online platform within that country. So, what we are doing is supporting them in all the service at the back end to be able for them to increase their marketing and sales efforts to their customer base. Because we do not own the customer in the individual countries. Our customer is the distributor. The distributor owns the customer relationship with the end user in the market. That’s the reason why we decided, and that’s a rather beautiful modem, I would say, why we decided to develop an interactive learning program, which is online with the clinicians, and the distributors, and the local clinicians in each individual country where there is a real-time translation in their local languages.

So that’s the type of activities that we are undertaking with the distributors.

Anthony Vendetti: Okay. That’s very helpful.

Operator: Your next question is coming from John Cobb, who is a private investor. John, your line is live.

Unidentified Analyst: Thank you. I’m John Cobb, nice to speak with you again. Can you hear me?

Arjan Haverhals: Yes, loud and clear, John.

Unidentified Analyst: Okay. Your discussion with Anthony helped me to better understand the process at milestone is incurring and trying to establish the rollout of the CompuFlo technology. One of my questions is when you get the pricing fixed with Medicare insurers. And when you get that end of it, when you get the insurability part, all set up, then where is milestone? Are all these doctors really enthusiastic about using CompuFlo technology? Or once you get the insurance part of it all established are you going to have to engage a sales force to go around the country to pain clinics or hospitals, trying to get them to use it? In the dental business, part of the traction you’re getting is from patients? Is the same process going to be necessary from a milestone to do that?

Or are these doctors that you are engaging with saying, okay, we really like CompuFlo, we want to use it in our total practice, but we have to make sure we can get paid. Where is the level of acceptance or enthusiasm for the CompuFlo technology with hospitals and pain clinics, and clinicians and doctors, could you tell me that?

Arjan Haverhals: Yes. No, it’s very simple. Like I said, reimbursement is key. We do not have to invest in a heavy sales organization in medical because, as you know, what we have shared in the past as well, we are lined up already with a distributor called CTI that are in 24 states in the United States, they are experienced in anesthesia in the operating room. So, I’m not so worried about the expansion of the sales force. From the dental product as well as exactly for all the question that you asked, the short answer to that is that’s the reason why we have opened the portal and while we are so successful in the — with the sales in the United States, combined with digital marketing increasing marketing qualified lease where we do not necessarily need to have a heavy sales force because what everybody needs to understand, yes, of course, you need to have additional new customers.

But the main part of the business is the recurrent revenue stream of the consumables. And that’s what we decided to do to open the portal, increase our customer service, customer support after sales service. And that’s also the reason why we enjoy the growth that we have reported. So, I think that answers your question. Thank you for the question, John.

Unidentified Analyst: Okay. One more question on. It seems to me that you’re working on two fronts with government approval. You’re working with Medicare and you’re also working to get CompuFlo as the standard of care with certain government agencies. If you get that, wouldn’t that just kind of eliminate any more events you have to have with Medicare for adaptability of this technology? I mean, because there…

Arjan Haverhals: I think John, there are two different things. The one is not going hand in hand with the other. So, Medicare doesn’t have any influence on the government. The government doesn’t have any influence on the Medicare. That is two processes, et cetera. So, I hope that, that is sufficient in answering your question. Thank you, John.

Operator: Your next question is coming from Robert Brennan, who is a private investor.

Unidentified Analyst: Thanks very much for the call. So, a couple of questions. Great to see the improvement on the margins in the dental business. I think you’re obviously headed in the right direction because if you can sell less and make more, that’s always going to be a positive in light of the anticipated growth and in addition to that. But how many — what kind of growth do you anticipate in the dental business and also what the opportunities might be in Europe?

Arjan Haverhals: Yes Rob, thanks for the question. Without going into details what my growth objective is for the organization. I think first of all, definitely, there is a gigantic growth opportunity in the United States based on what we have been doing in the past, right? So, the growth for the Company would definitely be driven firstly, by the growth in the United States. Let’s agree on one thing. I definitely want to outperform the results that we had over the entire year 2023 because otherwise, it’s not fun if we would have similar results, right? That’s one thing. Secondly, in the international markets, what I’m doing there, and that’s important to understand that from an operational business is, I want to make the current good distributors being better distributors then what I want to do is the mid-tier of — and the good distributors is the 15 distributors being responsible of 85% to 90% of our business, right?

And then you have a group below that, that you want to develop to the higher tier. And then you have a number of fragmented distributors. And it does not always help to put a lot of emphasis on that, let’s say, a distributor that is ordering for 5,000 or 10 brands a year — if I look then at the cost side or the cost of acquisition, that’s pretty high based on the revenue that you are getting. So, we’re cleaning up on that. What is key is the expansion in other markets, in other international markets. Like, for example, I told you last year ago, we entered in Brazil. Of course, the results could have been better. But the Brazilian dental distributors actually have continuously to invest and have added and growth their dental sales force from two people to eight people.

So instead of only being in Sao Paulo, we are in others. We have initiated in-depth discussions with the dental chain in Brazil. that own 100 clinics. We are doing a financial valuation where we established the usage of our technology and look at the financial impact of five clinics that are belonging to the dental chain in Brazil. So, I do believe that Brazil will also contribute to more revenues as we speak throughout the course of the year. So, in a nutshell, the growth drivers for success. The U.S. market, international expansion and increase the utilization of hand pieces and recurrent business in the international markets. Does that answer your question, Rob?

Unidentified Analyst: Yes, it does. I mean I just — obviously, I think you’ve done it the right way in terms of getting margin improvement and then kind of cleaning up the periphery of it and getting rid of Henry Schein and all that stuff? And how many salespeople do you actually have in the dental, did you say 3?

Arjan Haverhals: No. So to be precise, I have two people, let’s say, in the field, including myself. I spent time for as well in the field as part of a CEO role. And then we have three people in the back office from a dental hygienist point of view that are doing education and aftersales support and customer development. Look, we are not in our marketing approach and our go-to-market approach. We are not knocking on doors. We are using the digital marketing platform and the lead generation over the marketing platform as a tool to acquire new customers. What we also are not doing is to go to the larger dental trade shows and meetings, because from an ROI perspective, it doesn’t make sense. People do not tend to buy on these trade shows.

But what we do specifically is a number of smaller scale hands on meetings. So, what you have to envision then is that you have about 20 clinicians coming to an educational program where they use the technology where they get lectures and that results in a normally in the 50% conversion whilst we are there. So, we have to be smarter in our marketing approach and in our sales approach, and that’s what we are doing within the current go-to-market setup.

Unidentified Analyst: Okay. So, I guess — the other question I would have is that I do fully expect us to become the standard of care on the epidural side? So, we talk about what, 11 million epidurals given a year. But can you kind of quantify that and what the actual monetary market size is? And in anticipation of getting, I don’t want to jinx anything, but Medicare approval and FSS approval, I would expect that, as you indicated, if you get a couple of Medicare areas approved is going to have some kind of a cascading effect into the other Medicare jurisdictions. But what kind of like monetary revenue market are we looking at in terms of the epidural space?

Arjan Haverhals: Yes, absolutely. This is a very important question, Rob. Thank you for asking that. So total market of that we do is 11 million procedures, right? I will take you through it step by step. Now let’s assume just for doing the math, we do 2 million procedures as a target, just to create a good picture about the potential, right? So, 20% of that market is 2 million procedures, okay? So, 2 million procedures versus what I hope to establish an average sales price on the consumables of $200, right? That would be $400 million in revenue with a gross margin of 60% to 70%. So that is gigantic. So going back to your question, my responsibility is then to say, okay, if the target would be in this case, 20% of the total market by when can we have that penetration of 20%.

And that is the importance of reimbursement is coming in, right? And that’s the — also the release and the way that I’ve targeted it, the first two jurisdictions that we are currently active in represents about 22% of all the epidural steroid injections in the United States. That’s the reason why it is so important for us to get that price point establishment by the insurance provider because then we can go full for us out because the clinical concept is proven — the clinical efficiency is proven. People would like to use it. And then once they also will know that they get paid for it, then all the hurdles, so to say, in the mindset of the clinician are gone and then we can start moving ahead. So that’s a very important driver for growth for the Company, Rob.

Unidentified Analyst: Right well, very good call. And I guess my last thing would be, you only have one analyst that covers your company, I believe. Am I correct in that?

Arjan Haverhals: Yes. For the time being, we have Maxim and historically also had Northland.

Unidentified Analyst: Okay so are there any plans? Because my own self-interested opinion is the stock does not belong where it is currently, just the opportunities are so vast — are there plans — I know there’s only 24 hours in a day, but what kind of road show are these guys going to be doing on your behalf or some kind of IR push.

Arjan Haverhals: No, what you — well, again, good question. Thank you for asking that. Definitely, I welcome I welcome always coverage to that extent. And yes, I’m working in road shows and — but it’s all a matter of timing. And I think the timing is right now in the second half of this year, we will see an increase being at conferences, it’s not — that nothing is happening. I do a number of calls during the course of the week. So that is fine. Really good call. Great opportunity. I think you’re doing a great job. Thank you, Robert.

Operator: Your next question is coming from James Fisher, who ‘s a Private Investor. James, your line is live.

Unidentified Analyst: Well, I look at it, I guess, a little different than Robert it. when sales go from $2.6 million to $2.2 million and losses continue at $1.5 million per quarter and with $5 million of cash. I see that more investment has to be made in the next nine months or so. Is there any possibility that a larger medical instrument company could come in and acquire MLSS?

Arjan Haverhals: So, thank you for your question. Honestly, I don’t agree with your comment. I think what we have stated we have sufficient cash and cash equivalents at hand and also the way we manage the Company from a cash preservation point of view, we do not foresee to raise capital in the next nine months. But I’m more than willing to give you more details in a call out of this scope of the conference call. The second call is a question or second — sorry, the second part of your question related to, is there a willingness of companies buying and being interested in our technology. My comment to that is that everybody that has a business background has to understand that what we are currently doing and laying the groundwork for this company will have an effect not only on the stock but also on entertaining other discussions with other companies.

There is a number of potential opportunities in terms of strategic cooperation, whether it is synergistic, whether it’s research and development related. But the key, really the key for us is and also for other potential companies that would like to entertain discussions with us, is really the establishment of reimbursement. It’s not so much about the technology as such, but it is also very important what people are willing to pay or what they get reimbursed when they use the technology in this — yes, in this business segment.

Operator: And your next question is coming from Richard Dorado of Dr. Richard Durand, DDF. Your line is live.

Unidentified Analyst: Good morning, Arjan. So, I have a couple of questions. Over the years, you announced all these centers that used your device and liked it. Yes. It seems that not that you haven’t tried this, but I’m asking what happens. Does it the, let’s say, the Anesthesiology Association have some say in that, members would go, this is a really good technology. We would like to at least write some letter of endorsement that this is a wonderful technology, and it is superior to what we’re using and elicit that arm because that’s a much bigger entity than milestone is by far. And you have all these — I mean there was an announcement, I don’t know, 18 months ago where there was a large medical group in New England. And you name it, and that’s fine.

I don’t care who it is. We know basically who it is. So, the point being, are you able there mean there can’t be a lot that says, you can’t talk to these people and pitch that line of thinking to them to move this process along a little bit quicker. Can you comment on that? I have maybe some follow-up questions.

Arjan Haverhals: No, no, that’s a very good question. Thank you for the question. Absolutely, endorsement of organizations is, of course, always more than helpful and also important, and that brings us always back to development of KOLs that we have been doing, right? Yes. India, so I also have had my discussions with the organizations, the American Anesthesiology Society, I’ve had the meetings with them. And it’s a rather long paper trial process as well to get that established. So, what we have been doing, we go a little bit a different route now because all the work that we have been doing lately also in the interventional Ping society. We have an abstract and we are on the platform at the meeting in Miami and Florida, where we use that to spread in a way the use and to share the results of our technology for these organizations.

To your point, what we are also doing and what is very important is with ACIP, with the American Association for Anesthesiologists, and other professional organizations, we are reaching out to them because it is also important not only from an endorsement immediately, but later on also for supporting the technology for the final pricing on reimbursement establishment. And in particular, of course, also for having discussions for further development of this technology as I would like to recall, we have patents in Europe. We have patents granted in the United States for peripheral nerve block, where we would hope that other entities could be of potential interest on working together with us and to develop together with us a new technology or a new entities within the field of anesthesia.

So, I know it’s a little bit a long answer to your question because the short answer would be it hasn’t happened. But what I want to do and want to explain to you is, yes, we do have these discussions how to work with them and how to further endorse that. Now of course, you always have to — that’s the challenge that we have as a provider of a disruptive technology. We always have to explain very well why we have this technology. People perceive anesthesiologists perceive that we are saying that they are doing not their job very well or that we want to simplify these types of injections and all of the above is not true. What we are going to provide to them is actually a guidance system in the trajectory of placing an epidural needle in the epidural space.

And my approach is also not only to focus on anesthesiology department, but also at surgical, internal medicine and other societies because it’s the side effects of the current loss of resistance technique are not necessarily being detected and depicted immediately by the anesthesiologists, but they are going to be seen and managed by the after care, for example, in labor and delivery or doing procedures or doing spinal cord stimulator procedure. A good example here is what we are working on is neurosurgery, right, where neurosurgeons are doing spinal cord stimulator procedures. And they are using our technology because it increases safety and efficiency. They don’t get any dural punctures and they are able to, like I said, to have a more efficient and safe procedure.

Unidentified Analyst: Yes. So — but here’s my point. I’m a clinician. I go in and I perform a procedure in dentistry. You have anesthesiologists that are brilliant people. They really want to use this you should be able to pass into that native interest of those people and have them rally in some way, to help augment what you’re doing because their voice is much louder and much clearer. So, I assume that you have — I assume that you have listed this form of play for them because you have all these clinics that have at least some KOL or somebody that says, “Wow, this is really good. Well, let’s get this moving.” What’s happening there? Where is the color there? I’m not talking about the Company is doing. I’m talking about what and made an interested by the clinicians are that are providing the service.

That’s where they could be a huge help to you. I wonder what the same thing is going on in Europe. If you have these people that are so influential, why aren’t they able to help bring the cost to you? It should be more organic on their part to want to use this. And I don’t sense that that’s happening.

Arjan Haverhals: No, it is happening to the extent where we good.

Unidentified Analyst: I got that part. Okay. So now when do you go out there and request them to do this? Because that is the key because you can do all the other marketing you want to and you know there’s a tremendous number of procedures that are done every day to provide epidurals in all panels. And is there anything happening with labor and delivery. Are there claims being procedures being done with the epidural that are in labor and delivery. That’s where the money is. There’s a huge amount of procedures that go on there. So, what’s happening there? Where is the color there? Can you give us some color?

Arjan Haverhals: Yes. No, absolutely. So, what we are doing, in particular, these people that we are working now with — in the pain physician like the pain physician, the interventional pain market is much larger than OB/GYN, epidural and [indiscernible]. So, both, we have two advisory boards, where we use and utilize the input of these people to help us to generate new leads and opening doors in other entities and hospitals. But you have to be respectful of the fact that you still have to go through internal procedures, value assessment committees, financial committees to get that into the hospital. But what we are doing with all these people with the gap parts with [indiscernible] with people in Europe as well — they are part of the group where they continuously help us in opening doors and getting access to additional clinics.

You still have to do the groundwork. You still have to do the demos. You still have to follow the internal procedures of the hospital. It’s not a top-down approach where they will say, okay, I will use this right away. There’s a cost issue, there’s a reimbursement issue to your point. But absolutely, that’s what we are doing as well. Yes.

Operator: Thank you very much. Well, we appear to have reached the end of our question-and-answer session. I will now hand back over to management for any closing remarks.

Arjan Haverhals: Yes. Thank you for your time. Thank you for the lively discussions. Good questions. We remain positive and encouraged about what we have initiated and what we are going to do. We will keep you posted on any progress made on the activities that we alluded and highlighted on, and we will keep you posted. I wish you a fantastic day and looking forward to our continuous discussions. Have a good day, and thanks a lot.

Operator: Thank you very much, Arjan. This does conclude today’s conference. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.