Greetings, and welcome to Milestone Scientific Third Quarter 2020 Business Update Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I will now turn the conference over to your host, David Waldman, Investor Relations. Thank you. You may begin.

Good morning, and thank you for joining Milestone Scientific's third quarter 2020 financial results conference call. On the call with us today are Len Osser, Interim Chief Executive Officer; Arjan Haverhals, President of Milestone and CEO of Wand Dental Inc.; and Joseph D'Agostino, Chief Financial Officer. The company issued a press release today, Tuesday, November 17, containing third quarter 2020 financial results, which is also posted on the company's website. If you have any questions after the call or 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 the third quarter ended September 30, 2020. Before we get started, we would 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 it's business plan, expected revenue 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, adverse patent rulings, FDA or legal developments, competitive pressures, changes in customer and 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, 2019, and Milestone's report on Form 10-Q for the third quarter ended September 30, 2020. The forward-looking statements made during this call are based upon management's reasonable beliefs as of today's date, November 17, 2020. Milestone undertakes no obligation to revise or publicly update any forward-looking statements for any reason. With that, we'll now turn the call over to Len Osser, Interim CEO. Please go ahead, Len.

Good morning. Thank you, David, and thanks to everyone joining us for the call today. I am pleased to report that our dental sales increased more than seven-fold versus the second quarter of 2020 as dental offices began to reopen across the country and around the world. Our marketing initiatives and back to work promotions have been well received, and we are working hard to address the needs of both, dentists and their patients during the pandemic. Although we continue to witness the negative impact of the COVID-19 pandemic, the dental business has proven quite resilient, illustrating the loyalty of our current users and reinforcing the long-term positive outlook for the business. Moreover, we have enhanced our sales and marketing activities, which should boost sales of our dental instruments as the market recovers, which in turn, should help drive incremental high margin recurring disposable sales. Our sales and marketing initiatives around the CompuFlo epidural system are also taking hold. With a number of hospitals reopening to outside vendors, we are advancing our sales efforts around the CompuFlo epidural system, and the CathCheck technology. Specifically, we are expanding our business development pipeline while concentrating our efforts to close our first U.S. hospital. Most recently, we were awarded a group purchasing agreement for CompuFlo epidural system and CathCheck with Premier, a leading group purchasing organization with approximately 4,100 U.S. hospitals, and 200,000 other providers within their network. This agreement provides us enhanced access to Premier's members, and we believe should help accelerate our mission to become the standard-of-care. We believe this agreement is further validation of the growing awareness and importance of our instruments in improving health outcomes and significantly lowering costs for healthcare institutions. The clinical and safety benefits of the CompuFlo epidural system are backed by extensive published clinical data…

Thank you, Leonard. As Leonard mentioned, Wand dental business has begun to recover as dental offices reopened across the country and around the world. While we are not back to pre-pandemic levels, I'm pleased to report our sales are trending in the right direction. An important revenue driver in our business model is the recurrent sales of our disposables. However, to drive further growth we are working aggressively to expand our installed unit base. For this reason, we have launched a series of back to work promotions on both of our Wand instrument and disposables to incentivize our distributors and dentists, as well as support them in the business and practice growth during this difficult period. The initial feedback has been promising on both, the domestic and international fronts. As an example, I'm pleased to report we recently signed an important new agreement in Russia as a result of our efforts. It is important to note that the Wand instrument offers significant benefit in terms of establishing a safe environment for patients and staff as we use sterile single-use disposables. In addition, when using the Wand, a dental procedure can start in as little as 60 seconds after making the injection. For this reason, unlike conventional procedures, the dentist does not need to move from one operatory room to another and change protective gear while waiting for the anesthesia to set in. Accordingly, we believe there is significantly less risk of cross-contamination, which has been reinforced based on the feedback we received from dentists. Our enhanced marketing efforts around the Wand focused on the significant value drivers of our instrument, including safety, efficiency, and importantly, supporting the growth of dental practices. As said, I'm pleased to report the sales for the dental business are trending in the right direction. This…

Thank you, Arjan. Revenue for the three months ended September 30, 2020 was $1.2 million versus $1.9 million for the third quarter of 2019. Dental revenue decreased by approximately $644,000 due to the impact of the COVID-19 pandemic on the company's customers, suppliers, vendors and other business partners. Medical revenues for the three months ended September 30, 2020 and 2019 are nominal, reflecting our strategy to place the instruments with KOLs at no cost to drive awareness, and then adoption of the instrument. Gross profit for the third quarter ended September 30, 2020 was approximately $836,000 or 67% of revenue, versus approximately $1.4 million or 72% of revenue for the third quarter of September 2019. Operating loss for the three months ended September 30, 2020 was approximately $1.5 million versus approximately $1 million for the quarter ended September 30, 2019; the increase in loss is the result of decrease in dental revenues. Net loss for the three months ended September 30, 2020 was approximately $1.5 million or $0.02 per share, versus a net loss of $2.8 million or $0.06 per share in the prior period. Now, I'd like to turn your attention to liquidity and capital resources. At September 30, 2020 the company had cash and cash equivalents of $14.4 million compared to cash and cash equivalents of approximately $1.5 million as of December 30, 2019. As of September 30, 2020 the total current assets were approximately $18.9 million, and working capital was $15.4 million. Revenue for the nine months ended September 30, 2020 was $3.2 million versus $6.1 million for the nine months ended September 30, 2019. Dental revenues decreased by approximately $2.8 million, which is related to the decrease in sales of hand pieces and devices throughout the country and internationally due to the COVID-19 pandemic. Gross profit for the nine months of 2020 was $2.2 million or 68% of revenue versus $4.2 million or 69% of revenue for the nine months of 2019. Operating loss for the nine months of 2020 was approximately $6.3 million versus approximately $2.9 million for the nine months of 2019; this increase in loss is due to the result of decrease in dental revenues. Net loss for the nine months of 2020 was $6.3 million or $0.11 per share, versus a net loss of $4.7 million or $0.11 per share for the comparable period in 2019. At this point, I'd like to turn the call back over to Leonard Osser. Leonard?

Thank you, Joseph. We remain encouraged by the outlook for the business as the dental business is starting to bounce back. In addition, we remain confident in the market potential of the CompuFlo epidural, and the CathCheck, which we believe will to transform the industry and ultimately become the standards of care. Overall, we are in a strong financial position, given the fact that we had over $14 million in cash-on-hand as of September 30, 2020. In the meantime, gross margins from the dental business have held steady in the high 60% range. We continue to carefully monitor expenses, and we have maintained appropriate inventory levels to ensure available stock as dental offices begin to return to more normal levels. Given the increase in dental sales which contribute substantial margin, our burn has remained approximately the same for the present -- in the present quarter. We are committed to driving shareholder value, and look forward to providing further updates as developments unfold. I'd like to thank you for joining the call today. At this point, we would like to open the call for questions.

Thank you. [Operator Instructions] Our first question is from Anthony Vendetti with Maxim Group. Please proceed.

Thank you. Good morning.

Good morning, Anthony. Hope you're well.

I am, thanks. So, hopefully everyone there is as well. I just wanted to talk a little bit about the agreement that you that was announced for -- it was agreement in Russia. Just if you can talk a little bit about the magnitude of that or what the implications are? And then talk a little bit about premiere; and how being on their preferred list, either has started to open doors or if COVID-19 is making that a slow go at this point?

Thank you for the question, Anthony. In regards to Russia, we have signed a renewed 3-year agreement with our distributor. Without going too much into the details, there is a significant growth of the business in the order of 20% to 25% year-over-year compared to the previous agreement; and that's definitely encouraging as it starts moving forward. The second point of your question in relation to Premier; of course, we are very delighted that we have been awarded that agreement. Prior to signing or being rewarded the agreement, we already were active with demos and trials, and we're targeting hospitals that belong to the Premier Group, and is definitely -- the agreement has definitely helped us in lowering the threshold of entering these hospitals, and also performing the number of demos and trials. So, we remain positive about the first commercial sale of one of the hospitals belonging to the Premier Group.

Okay, great. And then, just -- you know, in terms of COVID-19, obviously you had a seven-fold increase in dental sales sequentially; so things have picked back up. Would you say based on what's going on in the country right now, has that slowed? Or have your customers as well as -- has Milestone figured out a way to still conduct meetings and still be able to consummate sales in this environment?

Yes. At the moment, Anthony, we are in a position in the dental where we will increase sales, maintain margin in the dental division in this -- in the quarter that we're in right now. We will increase sales to China, we have -- we have started sales again, as I mentioned earlier, that we can't -- as Arjan mentioned earlier, though -- until there is -- we sell to our distributor, and they're obligated to pay for it, obviously, we cannot book it because we own approximately 28% to that distributor. So we cannot book that until they have sell-through. But putting that aside, the number where we are today has given us the opportunity to let our shareholders know that this quarter, the fourth quarter, is significantly better than the third quarter. How that will continue in the first quarter next year? We have no idea. We believe that given the efforts that dentists are making, both here and around the world, in keeping their patients safe, remaining safe themselves, is significantly enhanced that they use our product. So without having a crystal ball going forward, it would seem that we would maintain the level of the fourth quarter, which significantly -- which is significantly better than the second and the third. However, there is no way to tell because we don't we know what will happen with the pandemic, but we do offer the dentist a better way of doing anesthesia than using the 1860 competitor.

Understood.

Yes. And we also believe, obviously, and that's why we raised the capital that we have a balance sheet that now helps us mitigate any risk going forward for at least the next 12 months, regardless of what happens with COVID-19; that's why we raised the capital, and that's why we no longer need to raise capital. We have enough to withstand whatever the virus does over the next 12 months, or even 24 months, which we don't -- obviously, hope -- we think or hope would happen. But we also have enough in the system with the money that we raised to also move ahead with other products that are -- that were in the various stages of development. So the money that we have on-hand, can both give us the money that we need to do the marketing and sales and increase the dental business significantly, which we haven't had for the last four years or so; but also allow us to bring forth other technology, and also allow us to do the necessary marketing and sales, both in the United States and out of the United States for both, the CompuFlo and the CathCheck.

Okay, that's helpful. And it sounds like, in terms of where you are with the products and with your balance sheet; it's arguably the best position you've been in even in face of the pandemic, correct?

Yes, absolutely. I think that we're in the best position that we've been in, in many years given the patent portfolio, the team that we presently have working with us, and the enormity of the success that we've had with key opinion leaders throughout the world on the present technology. So yes, I think that we're in the best position we've been in many years.

And then just lastly, and then I'll hop back in the queue. On the hospitals that have been given the CompuFlo system, what has been the reception and have -- is it too early yet or have they made commitments based on how well it's performing to make additional purchases?

Yes, it definitely has helped the sales process or the potential shortening of the sales cycle because the value analysis team, normally -- we have to go through the hospitals for that value analysis team assessment, which especially for the capital equipment is a longer process. So we eliminate that part and it is easier, a shorter process to go through the value analysis team for the new products which is going to be then the disposables. So that is -- that's definitely a benefit. And the feedback also -- as we said we have increased the number of demos and trials as we speak; the feedback has been very promising because the initial hurdle of the cost of the capital equipment is no longer existing anymore. Also, based on the demos and the trials we are doing in particular, also based on the CathCheck, let's say unique selling proposition, and also, in a way the ease of using the CathCheck with immediately giving the confirmation of the right positioning of the catheter is very well perceived and received by the clinicians once we are doing the trials and the demonstrations. So my comment also to your question is that, as we speak, all our individual sales people are in the field and are conducting trials and demonstrations, and that is a daily activity for the next coming weeks.

As Arjan has said, Anthony, the product is continuing to perform as it has over the last year. The anesthesiologist recognized the value, they certainly recognize the value of CathCheck because it's blatantly obvious how much time they can save and avoid the pain of the patient, and the old way of analyzing the 20 to 40 minutes can be reduced to two minutes or less. So as far as the anesthesiologist, they recognize this very quickly, and the fact that we have such a broad array of clinical studies published in the major journals throughout the world, assures them that they should try it; but then once they try it, they are convinced with themselves. That's not the issue, the issue at the moment and what's delayed the sales is the pandemic is the -- it's the budget committees in the hospitals are at gate [ph] at the moment. And we're getting around that gate now in the way that Arjan has explained, by removing the capital equipment for one unit as a loaner to the institution when they commit to a pre-determined amount of disposables over a 12-month period. So there is no issue that we've had with the anesthesiologists, it's all based on the unfortunate situation with COVID-19.

Understood, thanks. I'll hop back in the queue. Appreciate it.

Welcome.

[Operator Instructions] Our next question is from James Terwilliger with Northland Capital Markets. Please proceed.

Hey, can you hear me?

Yes, James, I can. How are you?

I'm well. Thanks for asking. Very quickly, nice quarter. Just for some housekeeping; in the prepared remarks did you say $1.7 million for the fourth quarter of 2020, for revenue? Is that correct?

Yes. Our projection at the moment, and obviously, we never did this in the past but given COVID-19 we've decided to give some forward-looking information; so obviously, we're being extraordinarily conservative. Yes, Arjan is projecting a minimum of $1.7 million, excluding the China's sales. We believe that the China's sales this quarter will be around $450,000 but we can't book it as Arjan explained earlier, until they have their own sell-through. China has been not buying for a long period of time, they are now through their inventory; and China, fortunately, is pretty much through it, as you know, with the virus. But also, of course, having moved through the virus, economically they are coming back very strongly, though they are not where they were last year at this period with their GDP. But the trajectory is very, very good in China; so we will be able to project -- we have internal projections for China for next year, as they come back into the fold having not had any sales in the first, second and third quarter in China. But yes, the information that Arjan gave of the $1.7 million is where we believe at a minimum we will end up in the fourth quarter.

Thank you. That's a nice number, and it's a little bit higher than what I was looking for. It's a nice bounce from that COVID bottom there in Q2 in terms of revenue. My next question then is on SG&A expenses; as you did a very nice job sequentially, controlling expenses much lower than my estimates. How should I think -- and I don't want to get too far into guidance, and I know you don't want to get there either; but how should I think of SG&A expenses going forward? Can you maintain the level of $2.3 million that you're at here? I know you've got to expand as COVID allows you to but how should I think of SG&A expenses going forward in actual dollars?

Well, where we are now with the run of the business, our burn rate to use very round numbers, in the third quarter was approximately $350,000. It's different time-wise when certain things have, it's always about $350,000 burn in the third quarter. Given the increased sales in the fourth quarter, we anticipate that number to -- obviously, to be about the same. Now as we go forward next year, we will be working on various projects that are not yet finished project -- development projects for other instruments and other areas of medicine. But the burn should remain relatively the same because at the same time we expect increase in sales of both, our medical products, the epidural, the CathCheck, and the dental product as well. So if we look at that, and the fact that our CFO of many years, Joseph D'Agostino, does what my father suggested many years ago, which is basically to squeeze the nickel until the buffalo yells out; I think that we'll be successful.

And then lastly, with that -- two more, then I'll jump back in queue. So remind me, again, of what your U.S. sales and marketing platform looks like? And then with that balance sheet, and I know you -- you kind of tighten the belt here; what else are you looking at in R&D because you do have a platform technology that has some very attractive other clinical indications? So I'll jump back in queue after that. Thanks, again, and nice quarter.

Thank you very much, James. Okay, sales and marketing activities in the organization; when I look at the medical or the epidural segment that we are serving, for the time being, we have three dedicated sales people in the field, and we have one vacancy in one territory in the marketplace. So, what we also are doing, of course, prior to expand to the sales organization; we first want to have the commercial success and we first want to have -- let's say, the results that we all believe in that we will get prior to invest that money in the further expansion of the sales organization. So that's more the sales side of the marketing and sales activities. Based on your question on the marketing side, we continue to build on our web presence, we continue to have research performed, also to have an optimal understanding of the target groups in terms, both of the dental and the medical field, the target group that we are communicating with and communicating to. I think that would be my answer to your question about the marketing itself. Now, on the research and development pipeline; we are, of course, looking into using the technologies and other indications and other areas. We -- as we have said earlier as well, in last year or previous years, we are looking into a cosmetic injection for Botox injections, we do not have finalized or identified the details of that project but that's definitely an area where we will bundle our forces and put efforts into -- in the line [ph] moving forward. Priorities really, for us, based on our technology and our current portfolio is, it's further really accelerate if I can use the terminology on the epidural business, growing further the dental business or at least as a minimum, bringing that back to the levels prior to the pandemic, and then undertake the right activities to use our technology into future applications.

Nice quarter, guys. Thanks. Good job with your operations underneath the COVID cloud. And thanks for taking my questions. Thank you.

Thank you very much.

[Operator Instructions] Okay, there don't appear to be any more questions at this time. I would like to turn the conference back over to management for closing remarks.

I'd like to thank you very much for joining the call today. I know everyone is certainly eager for us to close our first hospital and hospitals in the United States; I assure you that we're working every day tenaciously to make that happen. And as soon as we do, we will certainly let you know. All the best, stay safe. Thank you very much for your support.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.