Milestone Scientific Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are with fiscal 2020. The company develops computer-controlled injection devices using its Dynamic Pressure Sensing technology. Dental products generated nearly all revenue; its FDA-cleared CompuFlo epidural system remained at an early commercialization stage.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Net sales | $10.30 million | $5.44 million |
| Gross profit / margin | $6.31 million / 61% | $3.62 million / 67% |
| Operating loss | $7.38 million | $7.45 million |
| Net loss attributable to Milestone | $6.82 million | $7.34 million |
| Net loss per share, basic and diluted | $0.10 | $0.12 |
| Cash used in operations | $4.02 million | $6.98 million |
- Revenue increased about 89%, primarily as dental offices reopened. Dental sales were $10.15 million; medical sales were $152,200.
- Gross margin fell from 67% to 61%, which management attributed to lower-margin China sales and higher freight costs related to import delays.
- SG&A increased to $12.74 million from $10.67 million, including higher employee and director costs and commercialization spending. R&D rose to $878,000 from $308,000.
- At year-end, cash and cash equivalents were $14.76 million, current assets $18.93 million, current liabilities $3.10 million, and working capital approximately $15.8 million. Management said liquidity was sufficient for at least 12 months from the filing date.
- Total liabilities were $3.59 million, principally lease liabilities and payables; no conventional outstanding note payable was reported at year-end. A $276,180 PPP loan was forgiven in 2021 and recognized as a gain. Operating cash burn continued, and the company reported an accumulated deficit of $107.7 million.
- Financing activities provided $4.57 million in 2021, primarily from warrant exercises; 2020 financing had provided $19.71 million, including public offerings.
Material changes and business developments
- Dental revenue recovered substantially from 2020, while medical revenue remained small despite increasing from $15,800. Management expanded its U.S. medical sales force and shifted U.S. and Canadian dental distribution toward multiple non-exclusive distributors.
- International sales represented approximately 62% of 2021 sales. China dental sales increased to $2.10 million from $77,400 in 2020.
- The company reported that two customers accounted for 20% and 35% of 2021 revenue, respectively, and three customers accounted for 13%, 28%, and 29% of year-end receivables, respectively.
- Shares outstanding increased to approximately 68.12 million at year-end from 64.14 million a year earlier. The company issued shares for consulting services and received proceeds from warrant exercises.
Outlook, risks, and unusual items
- No formal revenue, earnings, or cash-flow guidance was provided. Management expected dental recovery and increased hospital access to support sales efforts, but said COVID-19 variants could disrupt demand, operations, and commercialization.
- Key risks include continuing operating losses and cash burn; uncertain physician adoption of CompuFlo; dependence on third-party manufacturers, including a China-based handpiece supplier; supply-chain delays; customer concentration; regulatory and reimbursement uncertainty; and possible dilution or difficulty raising capital. Management noted that additional financing may be needed if revenue and cash flow do not improve.
- The company decided not to pursue FDA clearance for its intra-articular device at this time, citing financial constraints. Its cosmetic injection product also lacked funding for commercialization and regulatory applications.
- Milestone disclosed that its indirect interest in China-related Anhui Maishida was transferred to the Milestone China/Anhui CEO without Milestone’s approval. The company reported no ownership in Anhui, no proceeds received or expected, and no receivable or gain recorded for the transfer; it was investigating whether the stated consideration had been paid. Management was not pursuing legal action at the time of filing.
- The company recognized a $276,180 gain from PPP loan forgiveness and reported $242,589 of income related to previously deferred profit and its equity investment. These items contributed to net loss being lower than operating loss.
- Management found disclosure controls and internal control over financial reporting ineffective at December 31, 2021 because of a material weakness concerning safeguards over the Anhui equity interest. The company said remediation was in process. The independent auditor gave an unqualified opinion on the financial statements but did not audit or opine on internal-control effectiveness.
- The filing reports no material litigation. Subsequent to year-end, the Russia-Ukraine conflict was associated with a decrease in sales to Russia and Ukraine and was identified as a potential source of broader economic and cybersecurity risk.
Important facts for investors to verify
- Whether post-filing cash burn, sales trends, and medical-device adoption support management’s stated liquidity runway.
- The duration and financial impact of supply delays, China manufacturing concentration, and customer and receivables concentration.
- The status of the Anhui transfer investigation, any potential recovery, and remediation of the related internal-control material weakness.
- Whether gross margin can recover despite China sales mix, freight costs, and commercialization expenses.
- The precise concentration disclosures: the filing states two customers represented 20% and 35% of revenue and three customers represented 13%, 28%, and 29% of receivables; investors should confirm the underlying customer-level figures.
- Potential dilution from outstanding options, warrants, deferred share issuances, and the company’s remaining securities-registration capacity.