Milestone Scientific Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 15, 2024. Milestone Scientific develops computer-controlled injection technology for dental and medical uses. Its dental business sells instruments and disposable handpieces; its medical business includes the CompuFlo epidural system. Financial statements are unaudited.
Key financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net sales | $2.249 million | $2.598 million |
| Gross profit / margin | $1.676 million / 74.5% | $1.889 million / 72.7% |
| Operating expenses | $3.141 million | $3.232 million |
| Loss from operations | $1.465 million | $1.343 million |
| Net loss attributable to Milestone | $1.441 million | $1.308 million |
| Net loss per share, basic and diluted | $0.02 | $0.02 |
| Cash used in operating activities | $1.218 million | $2.004 million |
- Sales declined about 13.4% year over year. Dental sales fell $350,000 to $2.241 million; medical sales were only $7,420, versus $6,200.
- Gross profit declined $213,000, while gross margin improved to approximately 74.5% from 72.7%.
- SG&A was $3.035 million, down $39,000; reduced salaries and benefits and marketing-related costs were largely offset by higher professional, quality-control and regulatory expenses. R&D fell $46,000 to $94,000 as development of the next-generation STA system entered its final stage.
Financial position and liquidity
- At March 31, 2024, cash and equivalents were $4.005 million and marketable securities were $1.000 million, totaling approximately $5.0 million in cash and securities. Working capital was approximately $7.2 million; total assets were $11.351 million and total liabilities were $3.890 million.
- Cash increased $1.028 million during the quarter, reflecting $2.004 million of proceeds from selling marketable securities and $241,000 of financing cash flow, partly offset by operating cash use. The securities sale was a conversion of investments to cash, not operating cash generation.
- Liabilities primarily include payables, accruals and lease obligations; the filing reports no conventional borrowings. Operating and finance lease liabilities totaled approximately $369,000.
- Management forecasts liquidity sufficient for at least 12 months from the filing date, based on revenue and expense assumptions. It also says continued operations depend on raising additional capital until profitability, if achieved. The company has accumulated losses of $124.8 million.
Material changes, outlook and risks
- U.S. e-commerce and dental service revenue increased to approximately $1.3 million from $989,000, representing 53% of net sales versus 40% a year earlier. The company had terminated its remaining U.S. distributor in September 2023. International sales decreased approximately $274,000.
- Dental segment operating income was $626,000, slightly below the prior-year $642,000. Medical segment operating loss narrowed to $491,000 from $822,000, while corporate operating loss increased to $1.599 million from $1.163 million.
- On April 8, 2024, after quarter-end, the company completed a New Jersey NOL-program sale. The notes describe net proceeds of $2.0 million, while MD&A describes $1.9 million; investors should confirm the amount and its cash impact.
- Manufacturing relies on informal, purchase-order arrangements with third parties, including related-party supplier United Systems. The company had a commitment for 2,000 STA instruments totaling about $2.1 million, with approximately $1.1 million already advanced. Disruption or termination of supplier relationships could delay production and sales.
- Sales and working capital are concentrated: e-commerce represented 53% of sales and one international distributor 15%; two distributors represented 41% and 18% of receivables. Two suppliers accounted for 40% and 19% of accounts payable and related-party payables.
- Management cites risks including ongoing losses and possible need for capital, product adoption and commercialization uncertainty, reliance on third-party manufacturers and distributors, international operations, and competition. It reports no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective at a reasonable assurance level and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Reconcile the NOL-sale proceeds: $2.0 million in the notes versus $1.9 million in MD&A, and determine the net amount received.
- Track cash burn against management’s 12-month liquidity forecast, including the forecast assumptions and potential need for additional capital.
- Monitor the STA manufacturing commitment, advances, supplier concentration and any production or delivery disruption.
- Assess dental sales trends by channel and geography, and whether medical-device commercialization produces material revenue.
- Understand potential dilution: Q1 weighted-average shares were 79.7 million, while 76.6 million shares were outstanding at March 31 and 77.2 million at May 15; the filing’s weighted-average denominator includes shares issued or to be issued.