Good day ladies and gentlemen and welcome to the Milestone Scientific’s Third Quarter 2022 Business Update Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host David Waldman, Investor Relations. Sir, the floor is yours.

Good morning, and thank you for joining Milestone Scientific's third quarter 2022 financial results conference call. The company issued a press release this morning containing third quarter 2022 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. On the call with us today are Arjan Haverhals, Chief Executive Officer, who will provide an overview of the financial results and recent developments for the third quarter ended September 30, 2022. Due to personal [indiscernible] Keisha Harcum, Controller of Milestone Scientific is unable to join the call today. So, Mr. Haverhals will also be covering the detailed financial discussion. Before we get started, we would like to remind everyone that during this conference call, we may make forward-looking statements regarding the 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, 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, 2021, the Milestone’s report on Form 10-Q for the third quarter ended September 30, 2022. The forward-looking statements made during this call are based upon management's reasonable beliefs as of today's date, November 15, 2022. 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 Arjan Haverhals, Chief Executive Officer. Please go ahead, Arjan.

Thank you, David, and thanks to everyone for joining us today. I'm pleased to report we are back on the solid growth trajectory in the third quarter with sequential sales growth of 34.4% over the second quarter of 2022. In addition, our revenue for the third quarter of 2022 increased 28.6% over the same period last year without the benefit of sales to China. As we discussed last quarter, our dental segment faced temporary challenges in the second quarter of this year, due in part to the challenging situation in China and the Russia, Ukraine war. We believe we have, in large part, overcome these challenges as illustrated by the fact we achieved both sequential and year-over-year revenue growth for third quarter of 2022. The growth in revenue on both the domestic and international fronts reflects our successful decentralized multi-channel sales strategy. Importantly, we continue to add third-party dental distributors in international markets, which we believe will help further accelerate our growth. We look forward to announcing additional international distribution agreements as we continue to build our network across Asia, Africa, South America, and Europe. In the United States, we are working to bring on new strategic distribution and channel partners that sell through their respective networks of dental customers, especially in specialized areas of dentistry such as implant dentistry and aesthetics, as well as large dental service organizations or DSOs. DSOs play an increasingly important role within the domestic dental market. The current DSO market penetration of approximately 30% to 32% is expected to grow to 75% to 80% over the next 10 years. So to summarize, within our dental business, we continue to generate solid cash flow on a standalone basis. As we continue to grow our revenues, we expect to benefit from economies of scale due to…

[Operator Instructions] Your first question for today is coming from Anthony Vendetti at Maxim Group.

Thank you. Thank you, Arjan. I just wanted to talk a little bit more. I think it's a major deal to have a CPT code for the Epidural goes into effect January 3. So, right around the corner here, can you tell us what the actual code is, is it a temporary code that's good for five years and what the reimbursement amount is going to be at this point?

Thank you for your question, Anthony, and good morning. So, the reimbursement code is defined as a pressure sensing guiding system during Epidural analgesia. So, what I'm always explaining is that we have been [indiscernible] a technology code, which is then called a Category III code, which is a temporary code. And to your point, yes, the trajectory is normally one to five years to make that from a Category III code, a Category I code. The beauty is that the healthcare personnel and providers that want to use our technology and sending in the building and the coding based on their cost structure they can already apply for a billing and coding to their local insurance company, so the Medicare and the Medicaid and the private insurance company. Now, in particular, what we do is in that whole process of the temporary code, which is, of course, a unique opportunity for the company moving forward because the future is extremely important and bright. If I look at the – just a simple fact that we have been issued and granted to that extent that technology code. But what we are doing then is with a number of clinicians that we have gone to work with is providing them with all the information that they need to be able to send it into the local insurance company. So that is for example paperwork that is needed like a letter of medical necessity, a letter of justification because as it is a new technology, you have to explain to the clinicians and the insurance companies what the benefits are of this technology, compared to existing technologies and also why it is so important to use our technology, compared to existing in technologies. Now, to the second part of your question, the…

Yes, Arjan. No, that's great. And it sounds like you're doing everything from your end, providing the paperwork as well as the hotline for providers as they go through, because it's a new process for them with your particular device. So, helping them to make sure that they get properly reimbursed makes a lot of sense. In terms of now negotiations with customers, has that, sort of paved the way or made it easier at least, I know it's early, but at least from initial conversations, has it made it easier to sell the CompuFlo system now that there's a code right around the corner here?

Thank you for your question. Yes, I've been, as I always do, I've been pretty extensive in the fields as well. So, enjoyed several meetings during weekends. There was the American Society of Anesthesiology; 10 days ago there was the New York, New Jersey, American Society of Interventional Pain Physicians. But I can share with you just a simple fact that we were able to announce that we have a temporary code. The code, it's called [0777] [ph], which I already explained earlier is opening doors that normally stays – are staying close. people, just a simple fact that we are having clinicians. Also, the industry in general is looking at us and is impressed that we as a smaller entity have been able to get awarded that temporary code. Now, the second part of course is, yes, it will definitely open up a lot of opportunities with some ASCs, so ambulatory surgical centers, as well as private pain clinics. And it also opens up to work together with them because they are eager and enthusiastic to be part of establishing a reimbursable fee for this technology to be used within their practices. So, it's definitely, I would say, it's definitely a win-win for both the company and the clinicians, but more importantly, of course, for the patient because at the end of the day, we've proven quality of life for patients that is still one of the main motivation factors for our company and every person that is working and representing Milestone Scientific.

No, I agree. I mean, it should become the standard of care. Just lastly, you said you have enough cash to explore new products and applications. I know, we've discussed in the past, I was wondering if you can remind us, which applications might be at the forefront now, which ones are you starting to contemplate pursuing at this point?

Yes. So, the applications there, like I explained several times as well, they are numerous, right. As we speak, we get requests from other companies to look into different areas. We have been granted a patent in peripheral nerve block in Europe. We recently also have been granted a [patent] [ph] in the U.S. for peripheral nerve block. So, peripheral nerve block is potentially on our rated screen. We talked about neurology in general for [specificity] [ph]. We have a cosmetic patent for botulinumtoxin in cosmetic medicine applications. We have, of course, into articular. So, the opportunities are numerous here. I also do believe that that could potentially be interesting areas to further discuss with potential cooperation partners, not that we have identified them to further explore these opportunities. One thing of course is developing a new technology within a certain indication area, but we also have to make sure that you have the means to sell the products that come out of the research and development pipeline, and that you are able to commercialize that and launch that and can enjoy the revenues for that. So, the only thing that we have said in the Q, in the current Q and if you’ve heard my comments this morning, short-term, we are looking at some enhancements of the STA dental instrument. We have not kicked-off a major R&D project within the medical area. And like I said, we are still looking into the potential and the high priorities and prioritizing several opportunities. I also would like to bear in mind of everybody joining us on this call. Of course, we still remain a smaller sized company where each employee is wearing three to five hats. So, I always say to my team we better execute on the things that we can execute on and we do it right instead of taking too many things on our plate that would be difficult to execute on within the given time frames.

Okay. Thank you for all that color. Arjan, I'll hop back in the queue.

Thank you. Thank you, Anthony.

[Operator Instructions] Your next question is coming from [John Korb] [ph], a Private Investor.

Hello.

Good morning, John.

Good morning, Arjan. How are you?

I'm doing well.

Good. I wonder if you could help me understand where milestone is as a company, and how this rollout might have changed and how your expectations in the beginning were maybe not correct because you went from 10 salesmen to 5, I'm not sure if you even have the 5, what happened there and how has your view going forward changed from the original time when you started out with that sales force of 10 and then it, kind of dragged on and on and then you cut back to marshal your resources and save costs? And where are we now? I have a bunch of questions and I don't want to jump them all up, but help me understand, let's say you go into the university or the system at Louisville, introduce it. Then what happens? Does it just sit in the hands of one person? Are they actually using this CompuFlo system or where does that go when a hospital accepts your technology? Do they say, we can't do anything until we get the code or help me understand where we are with all that, please.

Absolutely. And thank you for your question, John. So, in a way, you asked two questions, let me start with the first one. You're absolutely correct that my initial vision was to build up a direct sales force with 10 people, at a certain moment, we had 11. And then as I announced in the prior quarter, we parted ways. We just not only in-light of cost measurements, but more importantly also of performance issues taking too much time, not necessarily having the right yes, attitude and the right skill set to sell the products directly. Now, what we should not forget at that time, we also were able to do that because we liaised with CTI. And CTI has presence in 22 states. They have about 32 sales reps. We have trained the entire organization of CTI. So, instead of having 10 direct sales reps in my organization, I now still have four and I have a group of 30 plus feet on the ground through CTI that are representing us and that will definitely help us not only with the penetration in the marketplace, but also on our cost side, on the balance sheet, right. So that's one part of the comment. Your second question, for example, University of Louisville in Kentucky. The process is, absolutely our person in the field, he has done a tremendous job in being very persistent just to give you again a flavor that is the process of getting eight weeks prior to getting a trial. We've done the trial with them at that time. We were vetted. We have had meetings with the CFO of that hospital and we were able and they were pleased with our technology and we were able to be approved in that hospital. Now, the process of…

It does. Thank you. I have an additional question. You have used the word and I believe it this is how it might play out. You've used the word snowballing that to get it started in various places is the most difficult. And then it might snowball because new prospects are told, while Louisville is using it, and others are using it, contact them and find out how they like it. and then the sales are easier and they're beginning to grow in a hockey stick effect. Is that still what you're looking for?

Yes. But let me explain it in more detail. Absolutely. Do I believe in the snowballing effect or the domino effect when we get institutions like Louisville or larger in institutions that we are working with also closing the area where we are situated in. Absolutely, I believe in that. What we should never forget is the long decision-making process that is taking place in these hospitals. We were recently in Texas. It took us nine weeks just to get registered to be able to do a trial. So, yes, I do believe in this noble effect if we are and when we are able to get more institutions that's supporting and are using our products. Absolutely. However, what is even more importantly, I strongly believe in that we have a second pathway or a third pathway, the second pathway being with the reimbursement code the entrance of the pain market segment. That will definitely be a very important driver for growth for the company moving forward. And why is that? You do not have that decision making process from, let's say, six to nine months. You do not have to go through a committee. The owner of the pain clinic can a make the decision right away. There are no necessarily immediately financial constraints. And thirdly, the direct benefit for the private pain clinic is that he can make money with a technology that we are offering. So, all-in-all, let's say, a year ago, we were very much so dependent on one, yes, roll through market, I always call it, which was labor and delivery in the hospital centers. In the mid-size, the larger the regional with the longer decision-making process. A year later, thanks to a CPT code and thanks to other things that we have undertaken. And thanks to being granted that code, we are now in an opportunity to have a really, really unique selling proposition for the private physicians and the private clinicians. Now, to your point, to that hockey stick at a certain moment in time in 2023, there I expect to see then that uptake of all these parameters going together and the execution of the strategy that we are currently undertaking that will then result in the medical revenues the company. So, I do believe that apart from the snowball effect that I probably mentioned in one of my earlier calls that snowball, the initial size of the snowball is getting bigger and I expect much more out of that in 2023.

So, then if I understand you correctly, the immediate hope and trust of milestone is to work with pain clinics, get that going to a great degree and the Epidural and hospitals might take a little longer. Do I understand you correctly?

Yes, but don't forget that we already have been in these hospitals, so we will continue working with the hospitals and we have a number of hospitals right now where we are in trialing and evaluation. So, I'm not saying we give up labor and delivery, absolutely not. My point is that we are going to do that in parallel and both of them are important, but short-term decision making process is definitely an advantage in the private pain clinics, compared to the hospital. So, I would expect that we have faster results within a private pain clinic as there is a shorter decision-making process than in the hospitals for labor and delivery. And of course, in the hospitals, we will also go into the pain clinics, and into the operatory room. It is just the process internally is different between these two entities. That's more my point. So, one does not exclude the other, not at all, but we are better positioned to take more benefit of both market segments, compared to a year ago.

Okay. I guess I understand a little better. I must say, I'm a little disappointed in the length of time the rollout has taken and maybe you are too. I'm not sure. But as a firm believer in this product, I guess it's a long-time shareholder. I expect that the embracing of this new technology to be at a faster track. Are we on the threshold maybe of that in the coming year or so or is it still going to be more of a [drawn up] [ph] process how do you envision it?

No, I think that we are in – like I said during this call this morning, I think we are in a good position, I think we are in a better position, then if I may, I'm allowed to say so a couple of years ago, as we have more arguments, initiatives, and strategic options at our hand. We should also not forget that we have submitted an FDA for an indication widening, so that we are not only focusing on lumbar and thoracic and cervical. Of course, it's out of our control the timing of the FDA and what they will come up with. But those things are important because the unique benefit of our technology in the lumbar spine are known, but the benefits of our technology in the thoracic and the cervical spine are even higher and everybody understands that immediately because the mobility rates are much higher, the higher you enter the spine, right? Lumbar spine mobility rates are 5%, thoracic 17%, and cervical is 30% to 32%. So that gives us also unique opportunities. And you mentioned that you were disappointed that it took a little bit time. I would say, I'm pleased with what we have been able to achieve, in particular, in the last year compared to where we were a year ago with the opportunities we have in the marketplace.

There are no further questions in queue. I would like to turn the floor back to Mr. Haverhals for any closing remarks.

Yes. Well, thank you very much for your time and I enjoyed the questions and the sessions. And please do not hesitate to contact me personally in case you have additional questions. And like I said, I think we are in a good position to continue to create shareholder value in the coming months and years. And I wish you a very good Tuesday. Please stay safe and I'm sure that we will meet again and talk to you soon. All the best. Bye-bye.

Thank you ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.