All references in this report to “Milestone Scientific, Inc.,” “us,” “our,” “we,” the “Company “or “Milestone” refer to Milestone Scientific Inc., and its consolidated subsidiaries, Wand Dental, Inc., Milestone Advanced Cosmetic Inc. and Milestone Medical Inc. and affiliate, Milestone Education LLC, unless the context otherwise indicates. Milestone Scientific is the owner of the following registered U.S. trademarks:
CompuDent
®
;
CompuMed
®
;
CompuFlo
®
;
DPS Dynamic Pressure Sensing technology
®
;
Milestone Scientific
®
;
the Milestone logo
®
;
Safety Wand
®
;
STA Single Tooth Anesthesia System
®
; and
The Wand
®
.
Item 1. Business
Overview
Milestone Scientific is a biomedical technology research and development company that patents, designs, develops and commercializes innovative diagnostic and therapeutic injection technologies and devices for medical, dental, cosmetic and veterinary applications. Since our inception, we have engaged in pioneering proprietary, innovative, computer-controlled injection technologies and solutions for the medical and dental markets. We believe our technologies are proven and well established.
We have focused our resources on redefining the worldwide standard of care for injection techniques by making the experience more comfortable for the patient by reducing the anxiety and stress of receiving injections from the healthcare provider. Our computer-controlled injection systems make injections precise, efficient and virtually painless. Milestone’s proprietary
DPS
Dynamic Pressure Sensing technology
®
is our technology platform that advances the development of next-generation devices, regulating flow rate and monitoring pressure from the tip of the needle, through platform extensions for local anesthesia for subcutaneous drug delivery, used in various dental injections, with specific applications for cosmetic botulinum toxin injections, epidural space identification in regional anesthesia procedures and intra-articular joint injections.
In 1997, Milestone Scientific released its first commercial product, the first computer-controlled local anesthesia delivery (C-CLAD) system, into the North American marketplace. This product was our proprietary, computer-controlled anesthetic delivery device, initially marketed as
The Wand
®
, a computer-controlled local anesthesia delivery (C-CLAD) device with a single-use disposable handpiece for the dental market, regulating and controlling the flow rate of anesthetics. This device was later re-branded commercially as the
CompuDent
®
System with the addition of several new features.
In 2001, Milestone Scientific was issued the initial United States Patent for
CompuFlo
®
technology, entitled “Pressure/Force Computer Controlled Drug Delivery Instrument with Exit Pressure,” allowing the device to continuously monitor and control the exit pressure of medication and/or fluid during an injection. We call this innovation
DPS
Dynamic Pressure Sensing technology. This same technology also enables doctors to accurately identify different tissue types based on detecting exit pressure during an injection. Later in 2004, the United States Patent Office issued a “Notice of Allowance” for patent protection on two additional critical elements of our
CompuFlo
technology: “Drug Delivery Instrument with Profiles” and “Pressure/Force Computer Controlled Drug Delivery with Automated Charging”.
Given our experience and established brand awareness within the dental industry, we elected to focus our initial product development efforts on the integration of
CompuFlo’s DPS
Dynamic Pressure Sensing technology into our legacy dental injection system. In 2006, the FDA cleared the first system utilizing
CompuFlo's
DPS Dynamic Pressure Sensing technology— the STA (Single Tooth Anesthesia) System and handpiece for use in the dental market, providing continuous real-time visual and audible pressure feedback from the tip of the needle while also precisely regulating the flow rate. Because of combining the ability to regulate the flow rate and monitor pressure at the tip of the needle, Milestone Scientific developed the industry’s first solution for painlessly administering an intra-ligamentary injection, i.e., “
single-tooth anesthesia
” which could be used as the only injection necessary for achieving dental anesthesia, foregoing the need to administer traditional injections such as a nerve branch block. In addition to
single-tooth anesthesia
,
the STA System can effectively perform all the traditional injections that dentists routinely give but can provide them virtually pain free and with numerous clinical advantages. This device, which also utilizes a disposable handpiece, is currently marketed by Milestone Scientific as the
Wand STA
®
System.
Milestone Scientific believes our dental devices have set a new standard of care for dental injections. Our dental devices have been used to administer tens of millions of injections worldwide. Each of our devices has a related single use disposable handpiece, leading to a continuing revenue stream following sale of the device. At present, we sell disposable handpieces unique to our legacy product (the
Wand
and
CompuDent
) to users who have not upgraded to our current dental product, the
Wand STA
System.
Building on the success of our proprietary, core technology platform for dental injections, and desiring to pursue other growth opportunities, we have recently begun to expand the uses and applications of our proprietary, patented technologies to achieve greater operational efficiencies, enhanced patient safety and therapeutic adherence, patient satisfaction, and improved quality of care across a broad range of medical specialties. In June 2017, we received FDA regulatory clearance to sell the
CompuFlo
Epidural Computer Controlled Anesthesia System in the United States for certain medical applications. We intend to continue to expand the uses and applications of our
DPS
Dynamic Pressure Sensing technology.
We believe that we and our technology solutions are widely recognized by key opinion leaders (i.e., academics, anesthesiologists and practicing dentists whose opinions are widely respected), industry experts and medical and dental practitioners as a leader in the emerging, computer-controlled injection industry.
Milestone Scientific remains focused on advancing efforts to achieve the following five primary objectives:
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Establishing Milestone’s
DPS
Dynamic Pressure Sensing technology platform as the standard-of-care in painless and precise drug delivery, providing for the first time objective visual and audible in-tissue pressure feedback, and continuing to expand platform applications;
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Following obtaining successful FDA clearance of our first medical device in June 2017, Milestone Scientific is transitioning from a research and development organization to a commercially focused medical device company;
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Commercializing our
CompuFlo
Epidural System, a transformative device for epidural anesthesia procedures;
|
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Expanding the global footprint of our
CompuFlo
Epidural System by partnering with distribution companies worldwide; and
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Continuing the commercial launch of our proprietary cosmetic injection device for delivery of botulinum toxin (such as
Botox
®
and
Dysport
®
).
|
Our dental devices are sold in the United States, US territories, Canada and in 60 other countries with FDA, CE and other clearances since receiving FDA clearance in 2017, our epidural devices have had minimal sales in the United States and Europe.
DPS
Dynamic Pressure Sensing Technology; Our Proprietary Core Technology Platform
Our first commercial product, our proprietary, computer-controlled anesthetic delivery device, initially marketed as the
CompuDent
®
Wand/STA system later re-branded commercially as the
Wand /STA
System, for the dental market, uses patented technology, including a single-use disposable handpiece, to control the flow rate of the anesthesia during the injection, allowing virtually painless injections for all dental procedures with optimal effectiveness. Over the years, the
CompuDent
System has been widely heralded as a revolutionary device, considered one of the major advances in dentistry in the 20th century, and has been favorably evaluated in more than 50 peers reviewed or independent clinical research reports.
Our next significant intellectual property advancement was a quantum improvement over our
CompuDent
®
System – the development of our proprietary
CompuFlo
®
Computer-Controlled Drug Delivery System with
DPS
Dynamic Pressure Sensing technology, an advanced and FDA-approved technology for the painless and accurate delivery of drugs, anesthetics and other medicaments into all tissue types, as well as for the aspiration of bodily fluids or previously injected substances. Its regulation and control of the flow rate continues to provide painless delivery benefits, while its innovative dynamic pressure sensing capability provides visual and audible in-tissue pressure feedback, identifying tissue types to the healthcare provider. This pressure feedback extends the benefit of painlessness from anesthetics with known viscosities to a wide range of liquid drugs and other medicaments with varying viscosities and flow rates. Such pressure feedback, part of our
DPS
Dynamic Pressure Sensing technology, also allows the healthcare provider to know when certain types of tissues have been penetrated and permits the healthcare provider to inject medicaments precisely at the desired location. Thus, real-time continuous pressure feedback can prevent the injection to tissue outside the intended target area, an important characteristic in the injection of chemotherapeutics and other toxic substances.
In addition to the ability to determine exit pressure In-Situ (in the injection site tissue) at the tip of the needle, minimizing tissue damage (and eliminating the pain of the injection) because the flow rate and pressure of the injection are precisely controlled,
CompuFlo
®
computer-controlled Drug Delivery Systems features a proprietary algorithm, which allow for the measurement of the exit pressure. These algorithms contain the critical components of specific drugs, parameters of needles, tubing and syringes and all other pertinent components for the safe and efficacious delivery of medications for all procedures.
CompuFlo
®
technology also enables devices to provide a digital record of the time and volume of anesthetic or medicament injected.
Each CompuDent
®
and Wand/STA System also includes a disposable injection handpiece that is extremely comfortable, light and easy to use, providing for precise tactile control during the injection, an electro-mechanical (computer-controlled) fluid delivery instrument and the ability to record data from the injection event. The pencil grip used with the handpieces provides the practitioner with enhanced tactile sense and accurate control and allows bi-directional rotation, eliminating needle deflection, resulting in a greater accuracy and success. The handpiece is vibration-free because it does not have a motor or electrical component in it and, since the handpiece does not look like a typical syringe, we believe it also reduces patient anxiety and offers the possibility of curing dental phobia of which an estimated 40 million Americans suffer.
As confirmed by numerous noted medical and dental experts within academia and the clinical practice arenas,
CompuFlo
Systems using
DPS
Dynamic Pressure Sensing technology have the potential to greatly increase the safety and efficacy of many drug delivery procedures that currently rely upon the over 150-year-old hypodermic syringe technology and the tactile senses and delivery expertise of the administrator.
Devices using
DPS
Dynamic Pressure Sensing technology such as the
CompuFlo
System can be used to inject a wide variety of liquid medicaments as well as anesthetics. We believe our
CompuFlo
System avoids the negative side effects from the use of traditional hypodermic drug delivery injection devices, which are well documented in dental and medical literature and include risk of death, transient or permanent paralysis, pain, tissue damage and post-operative complications. Pain and tissue damage often result from uncontrolled flow rates and pressure created during the administration of drug solutions into human tissue. While several technologies have can control the flow rate, we believe our patented
DPS
Dynamic Pressure Sensing technology and
CompuFlo
Systems provide the ability to accurately and precisely control the pressure of the injection as well.
We believe our DPS Dynamic Pressure Sensing technology and
CompuFlo
Systems provides the following benefits:
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minimizes the pain associated with injections, resulting in a more comfortable injection experience for the patient;
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provides visual and audible in-tissue pressure feedback, identifying the desired target location to the healthcare provider, extending the benefit of painlessness from anesthetics with known viscosities to a wide range of liquid drugs and other medicaments with varying viscosities and flow rates;
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●
|
allows the healthcare provider to know when the target location is present and permits the healthcare provider to inject medicaments precisely at the desired location;
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provides a digital record of the time and volume of anesthetic or medicament injected;
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minimizes tissue damage because the flow rate and pressure of the injection are controlled;
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provides an integrated injection database of algorithms that have been defined which allow for the measurement of the exit pressure, containing the critical components of specific drugs, parameters of needles, tubing and syringes and all other pertinent components for the safe and efficacious delivery of medications;
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the pencil grip used with the handpieces allows significant tactile sense and accurate control;
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|
new injections made possible with the technology eliminate collateral numbness;
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bi-directional rotation of the handpieces eliminates needle deflection resulting in greater success and more rapid onset of anesthesia in injections; and
|
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|
the use of a single patient use, disposable handpieces minimize the risk of cross contamination.
|
Our first system utilizing a
DPS
Dynamic Pressure Sensing technology platform was our STA System and related handpiece for the dental market, currently marketed as the
Wand/ STA System
. Another platform extension of our
DPS
Dynamic Pressure Sensing technology platform is the
CompuFlo
Epidural System. In addition, we have developed platform extensions of our
DPS
Dynamic Pressure Sensing technology platform for intra-articular (for administering corticosteroids, hyaluronic acid and other medicaments into both major and minor joints for the alleviation of pain associated with arthritis and other deleterious joint conditions), cosmetic and veterinary applications. We intend to continue to develop and commercialize new applications of our
DPS
Dynamic Pressure Sensing technology platform as commercial line extensions.
CompuFlo
Epidural Computer Controlled Anesthesia System
In June 2017, we received FDA regulatory clearance to sell the
CompuFlo
Epidural Computer Controlled Anesthesia System in the United States for certain medical applications. The
CompuFlo
Epidural Computer Controlled Anesthesia System obtained CE mark approval in September 2014, allowing it to be marketed and sold in most European countries and many other countries accepting CE approved devices.
The
CompuFlo
Epidural Computer Controlled Anesthesia System (or the
CompuFlo
Epidural System) is one such platform extension of our
DPS
Dynamic Pressure Sensing technology platform, providing anesthesiologists and other healthcare providers the ability, for the first time, to quantitatively determine and document the pressure at the needle tip in real-time for proper needle placement in epidural procedures used for labor/delivery and back pain management. Our proprietary
DPS
Dynamic Pressure Sensing technology allows the
CompuFlo
Epidural System to provide objective visual and audible in-tissue pressure feedback that allows anesthesiologists to identify and confirm placement in the epidural space.
Our
CompuFlo
Epidural System provides an objective tool that we believe consistently and accurately identifies the epidural space by detecting the difference in pressure between the ligamentum flavum and the intrafilamentary tissue. In studies, the
CompuFlo
Epidural System
with
DPS
Dynamic Pressure Sensing technology has been shown to be effective in correctly identifying the epidural space. Knowing the precise location of a needle tip during an epidural injection procedure provides a measure of safety not presently available to doctors using conventional syringes. In the absence of fluoroscopy, identifying the epidural space by relying on the subjective perception of loss of resistance to saline requires a very long education period and learning curve and could result in morbidity and lack of efficacy. During back pain management epidural procedures, where fluoroscopy is commonly used, the
CompuFlo
Epidural System allows the clinician to locate the epidural space, without using fluoroscopy, thereby protecting the patient and clinician from unnecessary exposure to radiation along with significantly reducing capital and operating costs.
An abstract presented at the 45th Chilean Congress of Anesthesiology on November 11, 2017, entitled: Utilization of Dynamic Pressure Sensing™ in Epidural Procedures for Child Birth and representing the first formal presentation of our
CompuFlo
Epidural System in South America, summarized the results of a recent independent, investigator-led clinical study evaluating the use of Milestone’s
CompuFlo
Epidural System in 50 labor and delivery patients, concluding that the epidural space was correctly identified in 100% of the patients. In addition, the epidural space was located on the first attempt with all the patients. There were no cases of accidental puncture of the dura, a common risk factor for traditional epidural procedures using the loss of resistance technique. We believe that this represents a significant benefit for the payors, physicians, and most importantly, the patients.
In July 2017, Milestone Scientific acquired certain patent rights and other intellectual property rights related to the computer-controlled injection device of APAD Octrooi B.V. and APAD B.V. This patent portfolio solidifies our patent rights for computer-controlled local anesthetic delivery (C-CLAD) technology and expands our proprietary rights and provides low cost and simple instrument to deliver epidural injections.
In November 2018, a new clinical study published in the International Journal of Obstetric Anesthesia that finds the
CompuFlo
Epidural System to be successful in objectively identifying the epidural space—even in difficult patients. Accurate epidural space identification can build physician and resident confidence while reducing the number of attempts, poor catheter placement and accidental dural punctures that can be costly to the hospital and painful for the patient.
In January 2019, the Company announced the results of a four hundred patient clinical trial by researchers from the University of Miami, University of Texas and Northwestern University, and two prominent California-based pain clinics. Published-Ahead-of-Print in Anesthesia & Analgesia (the official Journal of the International Anesthesia Research Society), the randomized, controlled study compared the effectiveness of the
CompuFlo
Epidural System in labor and delivery and chronic pain management, where loss of resistance and fluoroscopy are the current standards of care. The
CompuFlo
Epidural System was found to be ninety-nine percent successful in objectively identifying the epidural space even in challenging patients with a higher body mass index.
In February 2019, the company announced a new 120-patient clinical study published in Anesthesiology Research & Practice that verifies the
CompuFlo
Epidural System consistently differentiates false loss of resistance from true loss of resistance during epidural placement. In all cases where the
CompuFlo
Epidural System’s pressure measurements were used to objectively identify the epidural space, the block was performed successfully with no complications.
In February 2019, the Company announced Ospedale “Pugliese Ciaccio” di Catanzaro is the first hospital in Italy to use the
CompuFlo
Epidural System for all epidurals in labor and delivery. For a local hospital performing a limited number of epidurals, the
CompuFlo
Epidural System offers a real-time, objective tool for accurate epidural space identification to help reduce failure rates and accidental dural punctures that can require further treatment and interventions.
CompuFlo
Intra-Articular Computer Controlled Injection System
Another platform extension utilizing our DPS Dynamic Pressure Sensing technology platform and
CompuFlo Epidural
System are our devices for administering corticosteroids and other medicaments into both major and minor joints for the alleviation of pain associated with arthritis and other deleterious joint conditions. As features of our DPS Dynamic Pressure Sensing technology, this device also precisely controls in-tissue pressure, increasing patient safety by reducing the risk of tissue damage and post-treatment pain related to excessive pressure that may occur during certain injections. Identification of the tissue, in which the needle tip is imbedded, is believed to be highly important in intra-articular injections and numerous organs, subcutaneous and intramuscular injections.
We believe our intra-articular injection device is particularly efficacious for arthritis patients who are obliged to endure multiple painful injections annually for a lifetime. Often these injections are not efficacious because the doctor using a syringe fails to locate the intra-articular space or does not inject the appropriate volume of corticosteroids or other medicament into that space. Our
CompuFlo
Epidural System has been shown successful in an independent animal study in administering medicaments into a certain intra-articular space using its computer-controlled pressure sensing capabilities.
The intra-articular device has obtained CE mark clearance and may be marketed and sold in most European countries and many other countries accepting CE approved devices. In December 2016, we received notification from the FDA that our 510(k) applications for marketing approval of the intra-articular device did not demonstrate that the device was as safe and effective as a legally marketed devices. The original 510K filed with FDA expired in January 2019. We intend to submit a new 510(k) application in 2019 that we believe will demonstrate substantial equivalency; however, we can provide no assurances of when, if ever, we will receive FDA clearance for our intra-articular device.
Cosmetic Botulinum Injection Device
The American Society of Plastic Surgeons (ASPS) reported that among the 14.2 million cosmetic minimally-invasive procedures performed in 2015, the top performed procedure, at 6.7 million procedures, was Botulinum Toxin Type A (commonly known as Botox) injection. Leveraging our experience in minimizing the pain of dental anesthetic injections, we established a joint venture in 2014 to develop and commercialize a device for the pain free injection of botulinum toxin. The joint venture entity, Milestone Advanced Cosmetic Systems, Inc., is owned 50% by us and 50% by Milestone China Company Limited (“Milestone China”), a company organized under the laws of Hong Kong and owned 40% by Milestone Scientific. Milestone China contributed $900,000 of cash to the joint venture and we have provided a royalty-free license to utilize our technology to the joint venture to develop a botulinum toxin injection device.
In November 2017, we announced plans for the commercial launch of our proprietary cosmetic injection device using our DPS Dynamic Pressure Sensing technology platform and our
CompuFlo
Cosmetic System for delivery of botulinum toxin. Our proprietary cosmetic injection device features improved needle placement with a comfortable stylus grip, precise dosing, the same technology platform that has made dental and epidural injections painless, and an intuitive touch-screen interface. Based on the positive outcomes of a series of multi-state human factor studies with targeted customers, we are not moving towards the commercial launch of our cosmetic device and applying for marketing clearance in Europe (CE clearance), and United States (FDA clearance). Although the Company’s instrument has progressed beyond the development stage, additional equity financing is necessary to fund the regulatory process and, if approved the commercialization of the instrument. To this end, the Company is currently in the process of pursuing additional financing. However, the Company and Milestone China can provide no assurance that additional financing will be consummated on acceptable terms, or at all.
We believe that the touch screen and other platform improvements embodied by our cosmetic device will form the basis for our next generation of devices.
Veterinary Nerve Block Anesthesia Device
The effectiveness of our veterinary nerve block anesthesia device (existing medical device) for such use was confirmed by a pilot study and final report completed by Cornell University, College of Veterinary Medicine. Additional studies with other universities are in process with respect to horses and small animals. We are exploring commercialization opportunities.
The Wand STA System
In 2006, we received FDA clearance for our Wand/STA System and disposable handpiece, the first system utilizing CompuFlo’s DPS Dynamic Pressure Sensing technology, for use in the dental market. The Wand/STA System and handpiece continue to provide all of the benefits of the CompuDent System, allowing dentists to provide virtually painless injections for all dental procedures, including routine fillings, as well as more sophisticated implants, root canals and crowns, while better facilitating single tooth anesthesia (now generally performed with a high-pressure spring-loaded gun-like device), but also incorporates the
"pressure feedback" elements of Milestone Scientific's patented
CompuFlo
Epidural System, thereby allowing dentists to administer injections accurately and painlessly into the periodontal ligament space, effectively anesthetizing a single tooth. Injections made by the Wand/STA System eliminate collateral numbness of the tongue, lips and facial muscles and often hasten the onset of anesthesia by eliminating the need for mandibular blocks. The Wand/STA also identifies intrafilamentary tissue, so dentists can find the precise location for single tooth anesthesia. This injection is of significant value in that it allows the dentist to profoundly anesthetize the tooth within one minute per root, versus up to 15-18 minutes for a block injection to take effect. The Wand /STA System can perform all the injections that can be done with a conventional dental syringe, and in addition, we provide the ability to perform the following: the palatal-anterior superior alveolar, anterior middle superior alveolar and inferior alveolar nerve block. The Wand/ STA System achieves these injections predictably and reliably. To date, substantially all our revenue has been generated by the Wand/STA System for dental applications.
Since its market introduction in the spring of 2007, the Wand/STA System has received favorable reviews and awards from the dental industry. In July 2007, noted industry publication Dentistry Today featured the Wand/STA System as one of the “Top 100 Products in 2007", helping to promote much broader recognition of the instrument and validating the Wand/STA System’s value proposition for dentists and patients, alike. In early 2008, Medical Device & Diagnostic Industry magazine distinguished the Wand/STA System as a 2008 Medical Design Excellence Award winner in the “Dental Instruments, Equipment and Supplies” product category. Of the 33 products to receive this coveted award, the Wand/STA System was one of only two winning products that serve dental practitioners.
In December 2008, Milestone Scientific continued to win broad acclaim for the
Wand/STA
System by winning a “Townie Choice Award”. The “Townie Choice” awards were originally started by Dr. Howard Darran and Farran Media, publisher of Dentaltown Magazine, to assist dentists in making product purchasing decisions, and are considered the “people’s choice” of the products and services available to the dental industry today. That same month, the
Wand/STA
System was also named as a Dental Products Report “Top 100 2008 Product of Distinction”. Additionally, the
Wand/STA
System was named one of Dentistry Today’s “Top 100 Products” for the third consecutive year in 2010.
Other Devices
At earlier stages of development are our products using
CompuFlo
’s
DPS
Dynamic Pressure Sensing technology for less painful injections for use in rhinoplasty, colorectal surgery, podiatry and other disciplines. In the self-injectable market, there are many injectable drugs routinely self-administered in a home or office setting using spring loaded automatic injection devices by people who suffer from long term chronic conditions such as multiple sclerosis, rheumatoid arthritis, and other diseases of the auto immune system. We believe
CompuFlo
’s
DPS
Dynamic Pressure Sensing technology, using pressure sensing capabilities, can serve as a painless subcutaneous injection method for these self-administered drugs. However, there can be no assurance that we will be able to successfully develop any such products, or that if developed, that we will be able to obtain FDA approval to market any such products, or even if we do obtain such FDA approval, that any such products will generate any revenue for us or be a commercial success.
Distribution and Marketing Arrangements
Our dental devices are sold in the United States, US territories, Canada and in 60 other countries abroad. In June 2017, we received FDA regulatory clearance to sell our first medical device, the
CompuFlo
Epidural Computer Controlled Anesthesia System in the United States. Since receiving FDA clearance in 2017, our epidural devices have had minimal sales in the United States and Europe.
Dental Market
In the spring of 2009, Milestone Scientific signed a distribution and marketing agreement with China National Medicines Corporation, dba Sinopharm. In early October 2012, the State Food and Drug Administration (“CFDA”) of the People’s Republic of China approved the
Wand/STA
System. However, the CFDA’s approval of the
Wand STA
handpieces was not received until May 2014 and the distribution of these handpieces in China began in the fourth quarter of 2014.
The distribution and marketing agreement with Sinopharm were terminated in September 2014. Proximate to that time, we entered into a new agreement with Milestone China to be our distributor for the
Wand/STA
System and handpieces in China. Milestone Scientific then owned, forty (40%) percent of Milestone China (the “Milestone China Shares”). In June 2017, Milestone Scientific sold its Milestone China Shares to an unaffiliated United States domiciled purchaser for a promissory note secured by a pledge of the Milestone China Shares, and received a 10-year option to repurchase the Milestone China Shares at the same price as the purchase price paid for the Milestone China Shares within the first two years and at fair market value (as defined in such agreement) for the remainder of the 10-year term.
As of March 2, 2018, the promissory note was in default. In April 2018, Milestone Scientific entered into a Release, Assignment and Termination Agreement (the “Termination Agreement”) with the issuer of the promissory note, pursuant to which, Milestone Scientific repaid the $250,000 payment made by the issuer and the issuer returned the Milestone China Shares to Milestone Scientific and cancelled the promissory note. Because of the Termination Agreement and related repayment made by Milestone Scientific, the Company derecognized the outstanding note receivable balance of $1,150,000 and the related deferred gain from financing transaction of $1,400,000. No gain or loss was recognized on the transaction.
In November 2012, Milestone Scientific signed an exclusive distributor and marketing agreement with a well-known U.S. domestic manufacturer and distributor, for the sale and distribution of the
Wand/STA
System and handpieces in the United States and Canada. The marketing initiative included participation in United States and Canadian dental shows, as well as pediatric dental shows; an active advertising initiative targeting major dental publications; and direct mailing campaigns to over 150,000 dentists across the United States and Canada. This exclusive distributor and marketing agreement were converted to a non-exclusive agreement as of December 31, 2016.
Beginning January 1, 2016, Milestone Scientific entered into a non-exclusive distribution agreement with Henry Schein. In June 2016, that agreement was replaced by a new agreement with Henry Schein providing for an exclusive distribution arrangement for our dental products in the United States and Canada by a newly formed marketing and sales group at Henry Schein.
Under this arrangement, we have a semi-dedicated independent sales force visiting dentists. Henry Schein’s exclusive products sales specialist team, which is comprised of 25 sales representatives and supported by over 1,000 field service representatives, will exclusively market and distribute the Wand/STA System and handpieces, together with a select group of other devices in the United States and Canada. Our agreement with Henry Schein has minimum purchase orders to maintain exclusivity in the third through tenth years. We believe that this exclusive arrangement will be more effective than previous arrangements relying on Wand Dental's appearances at dental shows and catalog sales.
Medical Market
During 2016, Milestone Scientific filed for 510(k) marketing clearance with the U.S. Food and Drug Administration (FDA) for both intra-articular and epidural injections with the
CompuFlo
Epidural System. In June 2017, the FDA approved the
CompuFlo
Epidural System for epidural injections. Milestone Scientific is in the process of meeting with medical device distributors within the United States and foreign markets. Milestone Scientific’s immediate focus is on marketing its epidural device throughout the United States and Europe.
In December 2016, we received notification from the FDA that based upon the 510(k)-application submitted for intra- articular injections, we did not adequately document that the device met the equivalency standard required for 510(k) clearances. Following consultation with the FDA Office of Device Evaluation, we filed a new 510(k) application for the device in June 2018. In August 2018, the FDA provided Milestone Scientific with a list of questions on the intra-articular 510(k) application filed in June 2018. Due to the delay in responding to FDA questions Milestone Scientific will be required file a new 510(K) application in 2019.
In February and March 2018, Milestone Scientific hired an Executive VP of Global Sales and Marketing and a Vice President of US Sales to fill a significant gap in our commercialization efforts of the
CompuFlo
Epidural System. In October 2018, Milestone Medical signed a Distributor Agreement in the U.S. This agreement provides that this Distributor will purchase and hold an inventory of the
CompuFlo
Epidural System and disposables for sale. At this time there have been no minimum purchase established with the Distributor. The Distributor identified above purchased five
CompuFlo
Epidural Systems and disposables after executing the Agreement.
We have entered into a limited number of distributor arrangements in Europe and the Middle East for our
CompuFlo
Epidural System. Our distribution strategy is initially aimed at having KOLs use and accept the device and initiates their own studies.
Veterinary Market
We are exploring various commercialization opportunities.
Patents and Intellectual Property
Milestone Scientific and its subsidiaries currently hold approximately 214 U.S. and foreign patents, and many patent applications. The Company’s patents and patent applications relate to drug delivery methodologies, drug flow rate measurement, pressure/force computer-controlled drug delivery with exit pressure, dynamic pressure sensing, automated rate control, automated charging, drug
profiles, audible and visual pressure/force feedback, tissue identification, drug delivery injection unit, drug drive unit for anesthetic, handpiece and injection device. Milestone Scientific and its subsidiaries also currently hold approximately 29 registered U.S. and foreign trademarks, including
CompuDent
®
, CompuFlo
®
, DPS Dynamic Pressure Sensing technology
®
, Safety Wand
®
, STA Single Tooth Anesthesia System
®
,
and
The Wand
®
Milestone Scientific relies on a combination of patent, copyright, trade secret, and trademark laws and employee and third-party non-disclosure agreements to protect its intellectual property rights. Despite the precautions taken by Milestone Scientific to protect products, unauthorized parties may attempt to reverse engineer, copy, or obtain and use products and information that Milestone Scientific regards as proprietary, or may design products serving similar purposes that do not infringe on Milestone Scientific’s patents. Milestone Scientific’s failure to protect its proprietary information and the expenses of doing so could have a material adverse effect on our business, financial condition and results of operations.
If Milestone Scientific’s products infringe upon patent or proprietary rights of others, we may be required to modify processes or to obtain licenses. There can be no assurance that Milestone Scientific would be able to do so in a timely manner, upon acceptable terms and conditions, or at all. The failure to do so could have a material adverse effect on our business, financial condition and results of operations
Manufacturing
Milestone Scientific has informal arrangements with the manufacturer of the
Wand/STA
System, epidural and intra-articular devices and with one of the principal manufacturers, related party, of the handpieces for those items, respectively. Pursuant to these informal arrangements, our third-party manufacturers manufacture the
Wand/STA
System under specific purchase orders without minimum purchase commitments, and at prices to be agreed upon in each such purchase order.
Our agreement with the principal manufacturer of handpieces includes pricing terms. Milestone Scientific has been supplied by the manufacturer of the
Wand/STA
System and its predecessor, the
CompuDent
System
,
since the commencement of production in 1998, and by the manufacturer of its handpieces since 2003. The manufacturer of our handpieces is in the People’s Republic of China and the manufacturer of the device is in the United States. Changes to pricing of the
Wand/STA
System by the manufacturer could have a material adverse effect on our financial condition, business and results of operations. Termination of the manufacturing relationship with any of these third-party manufacturers could significantly and adversely affect our ability to produce and sell the products. Though other alternate sources of supply for handpieces exist, Milestone Scientific would need to recover its existing tools or have new tools produced to establish relationships with new suppliers. Establishing new manufacturing relationships could involve significant expense and delay. Any curtailment or interruptions of the supply, whether as a result or termination of the relationship, would have a material adverse effect on our financial condition, business and results of operations.
Competition
As of this filing, there is no subcutaneous drug delivery platform or device on the market regulating the flow rate
and
pressure of an injection capable of delivering a painless injection at the desired location like Milestone Scientific’s proprietary, patented devices having our
DPS
Dynamic Pressure Sensing technology.
Milestone Scientific’s devices compete based on their performance characteristics and the benefits provided to the practitioner, patient and the business operations. Clinical studies have shown that our devices reduce fear, pain and anxiety for many patients, and Milestone Scientific believes that they can reduce practitioner stress levels, as well. Other computer-controlled local anesthesia delivery (C-CLAD) options are the Quicksleeper and SleeperOne, from Dental Hi Tec, Dentapen from Septodant, the Calajet from Aseptico, and the Comfort Control Syringe by Dentsply.
The Quicksleeper was invented in France by Dr. Alain Villette in 1991. It is marketed as the only local anesthetic delivery device in France that allows the ability to perform all intraoral local anesthetic injection techniques, including osteocentral anesthesia, quickly and without failure. The extra feature that gives the Quicksleeper this ability is a built-in motor in the syringe/handpiece that renders the syringe both an injector and a perforator of bone. That is, the handpiece of the Quicksleeper can perform an intraosseous injection via a motor driven perforation of the cortical plate of bone. A standard dental needle that attaches to the syringe spins as the motor rotates the handpiece thus acting as a perforator. However, the handpiece is relatively heavy, weighing 240 g. as compared to a standard syringe that weighs 80 g. Injection speed increases during the injection, but the operator cannot control when the injection speed increases.
Another computer-controlled injection instrument is called the Comfort Control Syringe or CCS. In the early 1990's, Dr. Mark Smith, a dentist from Ontario, Canada, invented a device that he incorporated into his practice as the local anesthetic delivery method. After perfecting the system, he released the rights of this device to Dentsply. In this system, many of the functions of the computer can be controlled directly from the syringe during the injection process. The base unit allows the dentist to program one of five different injections by pressing a single button. The five buttons marked on the base unit are block, infiltration, PDL, intraosseous and palatal. Each of these injections has a specific corresponding rate of local anesthetic delivery associated with it. The CCS enables a wide range of injection speeds controlled by the operator and the ability to control the computer directly from the syringe, but, since the CCS computer can be controlled by hand, the syringe must contain a certain amount of electronic equipment and this adds bulk to its circumference. The circumference of the CCS syringe is 112mm compared to 36mm for a traditional syringe, and 17mm for the
Wand/STA
System. In addition, because of the electronics in the syringe, the operator will feel a slight amount of vibration in the syringe while the injection occurs. This will not affect the anesthesia, but it certainly is a feeling that is different from the traditional syringe or the
Wand/STA
System, which both have no such vibration. The vibration in the Quicksleeper is minimal. This instrument is no longer being marketed.
The Calajet instrument is manufactured in Europe and has been very slow to grow market acceptances. It recently began marketing in the USA with similar result. The instrument is a higher price than the Wand STA and does not provide the DPS software. Although a competitor, we believe that without a substantial distribution network this instrument will have a difficult time to be successful in the USA.
The Dentapen from Septodent is the newest competitor in the market. This device is manufactured in Europe and began marketing in the USA in 2018. This device is priced similar to Wand/STA, but at this time, to our knowledge, it is slow to attract viable distribution in the USA.
Milestone Scientific’s proprietary, patented devices with its
DPS
Dynamic Pressure Sensing technology platform also compete with disposable and reusable syringes that generally sell at lower prices and that use established and well-understood methodologies in both the dental and medical marketplaces.
Rapid technological change and research may affect our products. Current or new competitors could, at any time, introduce new or enhanced products with features that render our products less marketable or even obsolete. Therefore, Milestone Scientific must devote substantial efforts and financial resources to improve existing products, bring products to market quickly, and develop new products for related markets. In addition, the ability to compete successfully requires that Milestone Scientific maintain an effective distribution network with a strong marketing plan. Any new products must comply with applicable regulatory authorities before they may be marketed. Milestone Scientific cannot assure that it can compete successfully, that competitors will not develop technologies or products that render our products less marketable or obsolete, or, that Milestone Scientific will succeed in improving its existing products, effectively develop new products, or obtain required regulatory approval for those products.
Government Regulation
The manufacture and sale of medical devices and other medical products are subject to extensive regulation by the FDA pursuant to the U.S. Food, Drug and Cosmetic Act (“FDC Act”), and by other federal, state and foreign authorities. Under the FDC Act, medical devices must receive FDA clearance before they can be marketed commercially in the United States. Some medical products must undergo rigorous pre-clinical and clinical testing and an extensive FDA approval process before they can be marketed. These processes can take many years and require the expenditure of substantial resources. The time required for completing such testing and obtaining such approvals is uncertain, and FDA clearance may never be obtained. Delays or rejections may be encountered based upon changes in FDA policy during the period of product development and FDA regulatory review of each product submitted. Similar delays also may be encountered in other countries. Following the enactment of the Medical Device Amendments to the U.S. Food, Drug and Cosmetic Act in May 1976, the FDA classified medical devices in commercial distribution into one of three classes. This classification is based on the controls necessary to reasonably ensure the safety and effectiveness of the medical devices. Class I devices are those devices whose safety and effectiveness can reasonably be ensured through general controls, such as adequate labeling, pre-market notification, and adherence to the FDA’s Quality
System Regulation (“QSR”), also referred to as “Good Manufacturing Practices” (“GMP”) regulations. Some Class I devices are further exempted from some of the general controls. Class II devices are those devices whose safety and effectiveness reasonably can be ensured using special controls, such as performance standards, post-market surveillance, patient registries, and FDA guidelines. Class III devices are those which must receive pre-market approval by the FDA to ensure their safety and effectiveness. Generally, Class III devices are limited to life-sustaining, life-supporting or implantable devices.
Pre-market Notification, the manufacturer or distributor may not place the device into commercial distribution until an order is issued by the FDA. By regulation, the FDA has no specific time limit by which it must respond to a 510(k) Pre-market Notification. Currently, the FDA typically responds to the submission of a 510(k) Pre-market Notification within 180 days. The FDA response may declare that the device is substantially equivalent to another legally marketed device and allow the proposed device to be marketed in the United States. However, the FDA may determine that the proposed device is not substantially equivalent or may require further information, such as additional test data, before the FDA is able to decide regarding substantial equivalence. Such determination or request for additional information could delay market introduction of products. If a device that has obtained 510(k) Pre-market Notification clearance is changed or modified in design, components, method of manufacture, or intended use, such that the safety or effectiveness of the device could be significantly affected, separate 510(k) Pre-market notification clearance must be obtained before the modified device can be marketed in the United States. If a manufacturer or distributor cannot establish that a proposed device is substantially equivalent to a legally marketed device, the manufacturer or distributor will have to seek pre-market approval of the proposed device, a more difficult procedure requiring extensive data, including pre-clinical and human clinical trial data, as well as extensive literature to prove the safety and efficacy of the device.
The FDA cleared the Wand, our
CompuDent
System and its disposable handpieces, for marketing in the United States for dental applications in July 1996; the
CompuMed
®
System for marketing in the United States for medical applications in May 2001; the
Safety Wand
®
for marketing in the United States for dental applications in September 2003; the
Wand/STA
System for dental applications in August 2006; and our
CompuFlo
Epidural System in June 2017. For us to commercialize other products in United States, Milestone Scientific would have to submit additional 510(k) applications to the FDA.
In 2017, the FDA reduced the barrier to marketing clearance for certain dental devices. As such the entry into the dental market for other manufactures of injection devices may increase. However, we believe that any new device will be very limited in sales volume without a significant distributor in the dental market.
Though certain dental devices have received FDA marketing clearance, there can be no assurance that any of the other medical devices under development will obtain the required regulatory clearance in a timely manner, or at all. If regulatory clearance of a product is granted, such clearance may entail limitations on the indicated uses for which the product may be marketed. In addition, modifications may be made to the products to incorporate and enhance their functionality and performance based upon new data and design review. There can be no assurance that the FDA will not request additional information relating to product improvements; that any such improvements would not require further regulatory review, thereby delaying the testing, approval and commercialization of product improvements; or, that ultimately any such improvements will receive FDA clearance.
Compliance with applicable regulatory requirements is subject to continual review and will be monitored through periodic inspections by the FDA. Later discovery of previously unknown problems with a product, manufacturer, or facility may result in restrictions on such product or manufacturer, including fines, delays or suspensions of regulatory clearances, seizures or recalls of products, operating restrictions and criminal prosecution.
Milestone Scientific is subject to pervasive and continuing regulation by the FDA, whose regulations require manufacturers of medical devices to adhere to certain QSR requirements as defined by the FDC Act. QSR compliance requires testing, quality control and documentation procedures. Failure to comply with QSR requirements can result in the suspension or termination of production, product recall or fines and penalties. Products also must be manufactured in registered establishments. In addition, labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. The export of devices is also subject to regulation in certain instances.
The Medical Device Reporting (“MDR”) regulation obligates us to provide information to the FDA on product malfunctions or injuries alleged to have been associated with the use of the product or in connection with certain product failures that could cause serious injury. If, because of FDA inspections, MDR reports or other information, the FDA believes that Milestone Scientific is not in compliance with the law, the FDA can institute proceedings to detain or seize products, enjoin future violations, or assess civil and/or criminal penalties against us, our officers or employees. Any action by the FDA could result in disruption of operations for an undetermined amount of time.
In September 2014 we received CE mark approval for the marketing of the
CompuFlo
Epidural System, allowing such product to be marketed in most European countries and many other countries accepting CE approved devices. In April 2017, Milestone Scientific obtained regulatory approval to sell the
CompuFlo
Epidural System and its handpieces in Australia. As of May 2014, the
Wand/STA
System was approved for sale in China. In March 2018 Milestone Scientific obtained regulatory approval to market the
CompuFlo
Epidural System in Canada.
Employees
As of December 31, 2018, the Company had a total 16 full-time employees including two executive officers of Milestone Scientific. Milestone Scientific also has a consultant who serves as a Director of Clinical Affairs and a business development consultant. None of our employees are subject to a collective bargaining agreement and we believe our employee relations are good.
Corporate Information
We were organized in August 1989 under the laws of the State of Delaware. Our principal executive office is located at 220 South Orange Avenue, Livingston, New Jersey 07039 and our telephone number is (973) 535-2717.
Our web address is www.milestonescientific.com. Information contained on or accessed through our website is not part of this filing. Our common stock is listed on the NYSE American under the ticker symbol “MLSS”.
Item 1A. Risk Factors
The following factors may affect the growth and profitability of Milestone Scientific and should be considered by any prospective purchaser or current holder of our securities. Our business, financial condition, results of operations and stock price could be materially adversely affected by any of these risks.
We have a history of operating losses that are expected to continue, and we are unable to predict the extent of future losses, whether we will generate significant revenues or whether we will achieve or sustain profitability.
We are a small, medical device company with a history of limited revenue and significant operating losses and our prospects must be evaluated considering the uncertainties, risks, expenses and difficulties frequently encountered by similarly situated companies. With only one exception (
i.e.,
2013), we have generated net losses in all periods since the commencement of our operations, including operating losses of approximately $8.0 million and $5.2 million for the years ended December 31, 2018 and 2017, respectively. Overall, at December 31, 2018, we had an accumulated deficit of approximately $86 million. We expect to make substantial expenditures and incur increasing operating costs in the future and our accumulated deficit will increase significantly as we undertake to commercialize our
CompuFlo
Epidural System. Our losses have had, and are expected to continue to have, an adverse impact on our working capital, total assets and stockholders' equity. Because of the risks and uncertainties associated with product development, we are unable to predict the extent of any future losses, whether we will ever generate significant revenues or if we will ever achieve or sustain profitability
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
The report of our independent auditors on our consolidated financial statements for the period ended December 31, 2018 included an emphasis of matter paragraph indicating that there is substantial doubt about our ability to continue as a going concern. Our auditors’ doubts are based on our recurring losses from operations and working capital deficit. Our ability to continue as a going concern will be determined by our ability to generate sufficient revenues from the sale of our products to sustain our operations and/or raise additional capital in the form of debt or equity financing. Our consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
We require additional funding and may be unable to raise capital when needed, which may force us to delay, curtail or eliminate commercialization efforts of our
CompuFlo
Epidural Computer Controlled Anesthesia System
.
Our operations have consumed substantial amounts of cash since inception. During the years ended December 31, 2018 and 2017, net cash flow used in operations was approximately $1.6 million and approximately $1.2 million, respectively. We expect to continue to spend substantial amounts on commercialization activities, including the commercialization of our FDA-approved
CompuFlo
Epidural Computer Controlled Anesthesia System. Until such time, if ever, as we can generate a sufficient amount of product revenue and achieve profitability, we expect to seek to finance future cash needs through equity or debt financings or corporate collaboration and licensing arrangements.
In addition, we may seek other alternatives to maximize the value of our intellectual property for dental applications, to focus more on, and finance, our medical applications. If we are unable to raise additional capital, we will have to delay, curtail or eliminate the commercialization of our
CompuFlo
Epidural Computer Controlled Anesthesia System, our efforts to obtain FDA approval of our intra-articular device and/or our product development and other commercialization efforts.
Raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.
To the extent that we raise additional capital by issuing equity securities, the share ownership of existing stockholders will be diluted. Any future debt financing may involve covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions, among other restrictions. In addition, if we raise additional funds through licensing arrangements or the disposition of any of our assets, it may be necessary to relinquish potentially valuable rights to our product candidates or grant licenses on terms that are not favorable to us.
Relying exclusively on third parties to manufacture our products, changes in our informal manufacturing arrangements made by the manufacturer of our products and disruptions at the manufacturing facility of our manufacturers exposes us to risks that may harm our business.
We have limited internal experience in manufacturing operations and have not historically established our own manufacturing facilities. We currently lack the internal resources to manufacture any of our products, including our
CompuFlo
®
Epidural Computer Controlled Anesthesia System. At present, we have an informal arrangement with the manufacturers of our products. We have one manufacturer of the handpieces for our devices which is under a long-term contract. We have a single manufacturer manufacturing our devices. Our current arrangement with our manufacturers is on a purchase order by purchase order basis. As a result, we do not have price protection or a supply commitment for our devices or handpieces. If either manufacturer insists on a material change in terms or determines to discontinue manufacture of our products, it could have an adverse effect on our financial condition and results of operation
An operational disruption in the facility of the manufacturer of our handpieces or devices could negatively impact production and our financial results. The occurrence of a natural disaster, such as a hurricane, tropical storm, earthquake, tornado, severe weather, flood, fire or other unanticipated problems such as labor difficulties, equipment failure or unscheduled maintenance could cause operational disruptions of varied duration. These types of disruptions could materially adversely affect our financial condition and results of operations to varying degrees dependent upon the facility, the duration of the disruption, our ability to shift business to another facility or find alternative sources of supply. Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles. Given our current manufacturing relationships, it is possible that our manufacturing requirements may exceed the available supply allotments under our existing agreements. Our anticipated future reliance on third-party manufacturers exposes us to the following additional risks:
We may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited, and the FDA must approve any replacement contractor. This approval would require new testing and compliance inspections. In addition, a new manufacturer would have to develop substantially equivalent processes for production of our products.
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Contract manufacturers might be unable to manufacture our products in the volume and of the quality required to meet our clinical and commercial needs.
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Contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully produce, store and distribute our products.
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Contract manufacturers are subject to ongoing periodic unannounced inspections by the FDA and corresponding state agencies to ensure strict compliance with current good manufacturing practice and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers' compliance with these regulations and standards and our manufacturers may be found to be in noncompliance with certain regulations, which may impact their ability to manufacture our products.
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If any third-party manufacturer makes improvements in the manufacturing process for our products, we may not own, or may have to share, the intellectual property rights to the innovation. We may be required to pay fees or other costs for access to such improvements.
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Each of these risks could delay the commercialization of our
CompuFlo
Epidural Computer Controlled Anesthesia System, limit our available supply of The Wand/ STA for dental applications, cause damage to our reputation, result in higher costs and/or deprive us of potential product revenues.
We depend on two principal manufacturers. If we cannot maintain our existing relationships or develop new ones, we may have to cease operations.
Milestone Scientific and its subsidiary Wand Dental has informal arrangements with the manufacturer of the Wand/STA Instrument,
CompuDent
,
CompuMed
,
CompuFlo
Epidural System, and CompuFlo Intra-Articular and with one of the principal manufacturers of the handpieces, for those items, respectively. Pursuant to the informal arrangements, they manufacture these devices and handpieces under specific purchase orders without minimum purchase commitments. Milestone Scientific has been supplied by the manufacturer of the Wand/STA Instrument,
CompuDent
,
CompuMed
,
CompuFlo
Epidural System and
CompuFlo
Intra-Articular devices since the commencement of production in 1998, and the manufacturer of its handpieces since 2003.
However, termination of the manufacturing relationship with any of these manufacturers could significantly and adversely affect our ability to produce and sell these products. Though other alternate sources of supply for handpieces exist, Milestone Scientific would need to recover its existing tools or have new tools produced to establish relationships with new suppliers. Establishing new manufacturing relationships could involve significant expense and delay. Any curtailment or interruptions of the supply, whether as a result of termination of the relationship or otherwise, would have a material adverse effect on our financial condition, business and results of operations.
Issues with product quality could have a material adverse effect upon our business, subject us to regulatory actions and cause a loss of customer confidence in us or our products.
In general, our success depends upon the quality of our products. Quality management plays an essential role in meeting customer requirements, preventing defects, improving our products and services and assuring the safety and efficacy of our products. Our future success depends on our ability to maintain and continuously improve our quality management program. A quality or safety issue may result in adverse inspection reports, warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution of products, civil or criminal sanctions, costly litigation, refusal of a government to grant approvals and licenses, restrictions on operations or withdrawal of existing approvals and licenses. An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products.
We may be subject to product liability claims that are not fully covered by insurance and that could put Milestone Scientific under financial strain.
Milestone Scientific could be subject to claims for personal injury from the alleged malfunction or misuse of the dental and medical products. While Milestone Scientific carries liability insurance that is believed to be adequate, there is no assurance that the insurance coverage will be sufficient to pay such claims should they be successful. A partially or completely uninsured claim, if successful and of significant magnitude, could have a material adverse effect on our business, financial condition and results of operations.
If physicians do not accept nor use our
CompuFlo
Epidural Computer Controlled Anesthesia System, our ability to generate revenue from sales will be materially impaired.
Although the FDA has cleared our application to begin marketing the
CompuFlo
Epidural Computer Controlled Anesthesia System, this is no assurance that physicians, hospitals, clinics and other health care providers will accept and use it. Acceptance and use of the
CompuFlo
Epidural Computer Controlled Anesthesia System will depend on many factors including:
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perceptions by members of the health care community, including physicians, about the safety and effectiveness of our product;
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cost-effectiveness of our product relative to competing products and systems;
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convenience, ease of use and reliability of our product relative to competing products and systems;
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product availability as well as, manufacturer warranty, maintenance, and customer and technical support;
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availability of reimbursement for our product from government or other healthcare payers; and
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effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.
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Because we expect sales of the
CompuFlo
Epidural Computer Controlled Anesthesia System to generate substantially all our medical product revenues in the near-term, the failure of this product to find market acceptance would harm our business and could require us to seek additional financing or make such financing difficult to obtain on favorable terms, if at all.
Developments by competitors may render our products or technologies obsolete or non-competitive.
The medical device industry is intensely competitive and subject to rapid and significant technological change. We expect that other companies (or individuals), whether located in the United States or abroad, will pursue the development of alternative injection-based or imaging-based systems that will compete with our products. Many of these potential competitors have substantially greater capital resources, larger research and development staffs and facilities, longer product development history in obtaining regulatory approvals and greater manufacturing and marketing capabilities than we do. These companies also compete with us to attract qualified personnel and parties for acquisitions, joint ventures or other collaborations. As a result, we may not be able to compete effectively against these companies or their products.
If we are unable to adequately protect our patents, trade secrets and other proprietary rights, if our patents are challenged or if our provisional patent applications do not get approved, our competitiveness and business prospects may be materially damaged.
Intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names and trade dress, are important to our business. We will endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced or used and in jurisdictions into which our products are imported. Our success will depend to a significant degree upon our ability to protect and preserve our intellectual property rights. However, we may be unable to obtain or maintain protection for our intellectual property in key jurisdictions.
Although we own and have applied for patents and trademarks throughout the world, we may have to rely on judicial enforcement of our patents and other proprietary rights. Our patents and other intellectual property rights may be challenged, invalidated, circumvented and rendered unenforceable or otherwise compromised. A failure to protect, defend or enforce our intellectual property could have an adverse effect on our financial condition and results of operations. Similarly, third parties may assert claims against us and our customers and distributors alleging our products infringe upon third party intellectual property rights.
We believe that the intellectual property underlying our products is a competitive advantage. We rely on a combination of patent rights, trade secrets and nondisclosure and non-competition agreements to protect our proprietary intellectual property, and we will continue to do so. There can be no assurance that our patents, trade secret policies and practices or other agreements will adequately protect our intellectual property. Our issued patents may be challenged, found to be over-broad or otherwise invalidated in subsequent proceedings before courts or the U.S. Patent and Trademark Office. Even if enforceable, we cannot provide any assurances that they will provide significant protection from competition. The processes, systems, and/or security measures we use to preserve the integrity and confidentiality of our data and trade secrets may be breached, and we may not have adequate remedies resulting from such breaches. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. There can be no assurance that the confidentiality, nondisclosure and non-competition agreements with employees, consultants and other parties with access to our proprietary information to protect our trade secrets, proprietary technology, processes and other proprietary rights, or any other security measures relating to such trade secrets, proprietary technology, processes and proprietary rights, will be adequate, will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or proprietary knowledge. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
If we must take legal action to protect, defend or enforce our intellectual property rights, any suits or proceedings could result in significant costs and diversion of our resources and our management’s attention, and we may not prevail in any such suits or proceedings. A failure to protect, defend or enforce our intellectual property rights could have an adverse effect on our results of operations.
We could lose our market advantage earlier than expected.
We believe that our products represent a significant improvement over any existing drug delivery injection system in use today. However, this competitive advantage can evaporate quickly if we are not able to commercialize our products quickly. In the medical device industry, the majority of an innovative product’s commercial value is realized during the early stages of commercialization, before competing products are developed. Our market advantage is based, in part, on patent rights and the need for new competing products and systems to obtain regulatory approval before they can be commercialized. The scope of our patent rights may be limited and may also depend on the availability of meaningful legal remedies.
Our failure to adequately protect our intellectual property rights, through patents or otherwise, or limitations on the use or loss of such rights, could have a material adverse effect on our ability to prevent the commercialization of competing anesthetic delivery systems. In some countries, basic patent protections for our products may not exist because certain countries did not historically offer the right to obtain specific types of patents and/or we (or our licensors) did not file in those markets. In addition, the patent environment can be unpredictable, and the validity and enforceability of patents cannot be predicted with certainty.
Third parties could obtain patents that may require us to negotiate licenses to commercialize our technologies, and we cannot assure you that the required licenses would be available on reasonable terms or at all.
Third parties may claim that one or more aspects of our technologies or products may infringe on their intellectual property rights.
Our computer-controlled anesthesia systems are complex systems and numerous U.S. and foreign patents and pending patent applications owned by third parties exist in fields that relate to the development and commercialization of drug delivery systems. In addition, many companies have employed intellectual property litigation as a strategy to gain a competitive advantage. It is possible that infringement claims may occur as the number of products and competitors in our market increases. In addition, to the extent that we gain greater visibility and market exposure as a public company, we face a greater risk of being the subject of intellectual property infringement claims. We cannot be certain that the conduct of our business does not and will not infringe intellectual property or other proprietary rights of others in the U.S. and in foreign jurisdictions. If any of our computer-controlled anesthesia systems are found to infringe third party patent rights, we could be prohibited from manufacturing and commercializing the infringing technology unless we obtain a license under the applicable third-party patent and pay royalties or are able to design around such patent.
We may be unable to obtain a license on terms acceptable to us, or at all, and we may not be able to redesign the system to avoid infringement. Even if we can redesign our products or processes to avoid an infringement claim, our efforts to design around the patent could require significant time, effort and expense and ultimately may lead to an inferior or costlier product. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from our business. Furthermore, if any such claim is successful, a court could order us to pay substantial damages, including compensatory damages for any infringement, plus prejudgment interest and could, in certain circumstances, treble the compensatory damages and award attorney fees. These damages could be substantial and could harm our reputation, business, financial condition and operating results. A court also could enter orders that temporarily, preliminary or permanently prohibit us, our licensees, if any, and our customers from making, using, selling, offering to sell or importing one or more of our products or using our proprietary technologies or processes, or could enter an order mandating that we undertake certain remedial activities. Any of these events could seriously harm our business, operating results and financial condition.
We are exposed to the risks inherent in international sales and operations.
In 2018, export sales outside of the United States made up approximately 50% of our total sales, and we sell our products to customers in approximately 62 countries and US territories . We have exposure to risks of operating in many foreign countries, including:
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fluctuations in foreign currency exchange rates, could increase the end user cost for instruments;
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restrictions on, or difficulties and costs associated with, the currency exchange from foreign countries to obtain US dollars;
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difficulties and costs associated with complying with a wide variety of complex laws, treaties and regulations;
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unexpected changes in political or regulatory environments;
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political and economic instability;
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import and export restrictions and other trade barriers; and
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difficulties in obtaining approval for significant transactions.
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Continued instability in the credit and financial markets may negatively impact our ability to commercialize our products
.
Financial markets in the United States, Canada, Europe and Asia continue to experience disruption, including, among other things, significant volatility in security prices, declining valuations of certain investments, as well as severely diminished liquidity and credit availability. Business activity across a wide range of industries and regions continues to be reduced. As a small medical device company, we rely on third parties for several important aspects of our business, including contract manufacturing of products, distribution of our products and sales and marketing. These third parties may be unable to satisfy their commitments to us due to tightening of global credit from time to time, which would adversely affect our business. The continued volatility in the credit and financial market conditions may also negatively impact our ability to access capital and credit markets and our ability to manage our cash balance. While we are unable to predict the continued duration and severity of any adverse conditions in the United States and other countries, any of the circumstances mentioned above could adversely affect our business, financial condition, operating results and cash flow or cash position.
Our ability to commercialize our products will depend in part on the extent to which reimbursement will be available from governmental agencies, health administration authorities, private health maintenance organizations and health insurers and other healthcare payers.
Our ability to generate revenues from our products will be diminished if the products sell for inadequate prices or hospitals or physicians are unable to obtain adequate levels of reimbursement for the cost they incur in connection with the use of the product. Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Healthcare payers, including Medicare, are challenging the prices charged for medical products and services. Government and other healthcare payers increasingly attempt to contain healthcare costs by limiting both coverage and the level of reimbursement for products. Insurance coverage may not be available, or reimbursement levels may be inadequate, to cover the charges for the use of such product. If government and other healthcare payers do not provide adequate coverage and reimbursement for any of our products, market acceptance of such product could be reduced. Prices in many countries, including many in Europe, are subject to local regulation and price controls. In the United States, where pricing levels for medical products, procedures and services are substantially established by third-party payors, including Medicare, if payors reduce the amount of reimbursement for a product, it may cause groups or individuals dispensing the product to discontinue use of the product, to substitute lower cost products even if the alternatives are less effective or to seek additional price-related concessions. These actions could have a negative effect on our financial results. The existence of direct and indirect price controls and pressures on our products could materially adversely affect our financial prospects and performance.
We are subject to substantial domestic and international government regulation, including regulatory quality standards applicable to our manufacturing and quality processes. Failure by us to comply with these standards could have an adverse effect on our business, financial condition or results of operations.
The FDA regulates the approval, manufacturing and sales and marketing of many of our products in the United States. Significant government regulation also exists in other countries in which we conduct business. As a device manufacturer, we are required to register with the FDA and are subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures. In addition, the federal Medical Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests that a device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by the FDA. In the European community, we are required to maintain certain ISO certifications to sell our products and must undergo periodic inspections by notified bodies to obtain and maintain these certifications. Failure to comply with current governmental regulations and quality assurance guidelines could lead to temporary manufacturing shutdowns, product recalls or related field actions, product shortages or delays in product manufacturing. Efficacy or safety concerns, an increase in trends of adverse events in the marketplace, and/or manufacturing quality issues with respect to our products could lead to product recalls or related field actions, withdrawals, and/or declining sales.
We may be subject, directly or indirectly, to U.S. federal and state health care fraud and abuse and false claims laws and regulations. Prosecutions under such laws have increased in recent years and we may become subject to such litigation. If we are unable to comply or have not fully complied with such laws, we could face substantial penalties.
Our operations are and will continue to be directly, or indirectly through our distributors, customers and health care professionals, subject to various U.S. federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, federal False Claims Act, and the Foreign Corrupt Practice Act of 1977 (“FCPA”). These laws may impact, among other things, our proposed sales, and marketing and education programs. The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal health care program such as Medicare or Medicaid. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal health care covered business, the statute has been violated. The Anti-Kickback Statute is broad and, despite a series of narrow safe harbors, prohibits many arrangements and practices that are lawful in businesses outside of the health care industry. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil and administrative sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal health care programs. An alleged violation of the Anti-Kickback Statute may be used as a predicate offense to establish liability pursuant to other federal laws and regulations such as the federal False Claims Act. Many states have also adopted laws like the federal Anti-Kickback Statute, some of which apply to the referral of patients for health care items or services reimbursed by any source, not only the Medicare and Medicaid programs.
The federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from, the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “relators” or “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. The frequency of filing qui tam actions has increased significantly in recent years, causing greater numbers of medical device, pharmaceutical and health care companies to have to defend False Claim Act actions. The Affordable Care Act includes provisions expanding the ability of certain relators to bring actions that would have been previously dismissed under prior law. When an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. The Deficit Reduction Act of 2005 encouraged states to enact or modify their state false claims act to be at least as effective as the federal False Claims Act by granting states a portion of any federal Medicaid funds recovered through Medicaid-related actions. Most states have enacted state false claims laws, and many of those states included laws with qui tam provisions.
The Affordable Care Act includes provisions known as the Physician Payments Sunshine Act, which require manufacturers of drugs, biologics, devices and medical supplies covered under Medicare and Medicaid to record any transfers of value to physicians and teaching hospitals and to report to the Centers for Medicare and Medicaid Services for subsequent public disclosure. Manufacturers must also disclose investment interests held by physicians and their family members. Failure to submit the required information may result in civil monetary penalties of up to $1 million per year for knowing violations and may result in liability under other federal laws or regulations.
Similar reporting requirements have also been enacted on the state level in the United States, and an increasing number of countries worldwide either have adopted or are considering similar laws requiring transparency of interactions with health care professionals. In addition, some states, such as Massachusetts and Vermont, impose an outright ban on certain gifts to physicians. These laws could affect our promotional activities by limiting the kinds of interactions we could have with hospitals, physicians or other potential purchasers or users of our products. Both the disclosure laws and gift bans will impose administrative, cost and compliance burdens on us. If we are found to be in violation of any of the laws described above and other applicable state and federal fraud and abuse laws, we may be subject to penalties, including civil and criminal penalties, damages, fines, or an administrative action of suspension or exclusion from government health care reimbursement programs and the curtailment or restructuring of our operations.
In addition, we are subject to the Foreign Corrupt Practices Act (“FCPA”) and other countries’ anti-corruption/anti-bribery regimes, such as the U.K. Bribery Act. The FCPA prohibits improper payments or offers of payments to foreign governments and their officials for obtaining or retaining business. Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, sales agents or distributors may be ineffective, and violations of the FCPA and similar laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, any of which would likely harm our reputation, business, results of operations and financial condition.
Excessive returns under our Exclusive Distribution and Supply Agreement with Henry Schein, Inc. could have a material adverse effect on our business, financial condition and results of operations.
In June 2016, we entered into a new exclusive distribution and supply agreement with Henry Schein pursuant to which they were appointed as the exclusive distributor for our dental products in the United States and Canada. Under that agreement, Henry Schein has a right to return our products for full credit against the purchase price paid by them under limited circumstances in accordance with such agreement, including but not limited to, returns due to shipment error by us or factory defect. Excessive returns during any calendar year could have a material adverse effect on our business, financial condition and results of operations.
Changes in laws and regulations over which we have no control can significantly affect our business and results of operations.
Any governmental entity that regulates our operations in the country in which they are located may enact new legislation or adopt new laws and regulations or policies at any time, and new judicial decisions may change the interpretation of existing legislation or regulations at any time in any of the countries in which our operations or projects are located. We have no control over any such changes. Any new laws or regulations governing our operations could have an adverse impact on our business, results of operations and prospects.
We rely on the continuing services of our Interim Chief Executive Officer and Director of Clinical Affairs.
We depend on the personal efforts and abilities of our Interim Chief Executive Officer and Director of Clinical Affairs. Milestone Scientific maintains a key man life insurance policy in the amount of $1,000,000 on the life of its Interim Chief Executive Officer. However, the loss of his services or the services of our Director of Clinical Affairs, on whom we maintain no insurance, could have a materially adverse effect on our business results of operations and prospects.
Milestone Scientific is effectively controlled by a limited number of stockholders.
Milestone Scientific’s principal stockholders, Leonard Osser, Gian Domenico Trombetta and K. Tucker Andersen beneficially own approximately 34.73% of the issued and outstanding shares of common stock. As a result, they can exercise substantial control over our affairs and corporate actions requiring stockholder approval, including electing directors, selling all or substantially all our assets, merging with another entity or amending our certificate of incorporation. This control could delay, deter or prevent a change in control and could adversely affect the price that investors might be willing to pay in the future for Milestone Scientific’s securities. In addition, because of the concentration of ownership of our shares of common stock, our stockholders may from time to time, observe instances where there may be less liquidity in the public markets for our securities.
Adherence to Sarbanes-Oxley Act and SEC rules concerning internal controls may be costly and compliance could have an adverse effect on Milestone Scientific.
The management of Milestone Scientific has assessed the effectiveness of internal control over financial reporting as of December 31, 2018. In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Milestone Scientific complied with Sarbanes-Oxley requirements to include in the annual report a management report on the effectiveness of the internal control over financial reporting.
In 2018 and 2017, Milestone Scientific utilized an outside consultant on a quarterly basis to review compliance with the internal controls over financial reporting. This expense amounted to approximately $15,000 in 2018 and 2017, respectively, and the cost is expected to continue in 2019.
The market price of our common stock may be volatile and may fluctuate in a way that is disproportionate to our operating performance.
Our stock price may experience substantial volatility because of many factors, including:
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sales or potential sales of substantial amounts of our common stock;
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delay or failure in initiating our strategy to commercialize our CompuFlo Epidural Computer Controlled Anesthesia System;
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the success of our strategy to commercialize our CompuFlo Epidural Computer Controlled Anesthesia System;
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announcements about us or about our competitors, including clinical trial results, regulatory approvals or new product introductions that could adversely impact the market acceptance or competitive advantages of our CompuFlo Epidural Computer Controlled Anesthesia System;
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developments concerning our licensors or product manufacturers;
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litigation and other developments relating to our patents or other proprietary rights or those of our competitors;
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our ability to successfully develop and commercialize to products and services for the healthcare industry;
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conditions in the medical device industries;
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governmental regulation and legislation;
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variations in our anticipated or actual operating results; and
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change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations.
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Many of these factors are beyond our control. The stock markets in general, and the market for small, medical device companies have historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors could reduce the market price of our common stock, regardless of our actual operating performance.
Sales of a substantial number of shares of our common stock, or the perception that such sales may occur, may adversely impact the price of our common stock.
Almost all our 33,859,034 outstanding shares of common stock at December 31, 2018, as well as a substantial number of shares of our common stock underlying outstanding warrants, are available for sale in the public market, either freely or pursuant to Rule 144 under the Securities Act of 1933, as amended. In addition, we have an effective S-3 registration statement on file with the SEC covering the sale by us of up to $30 million of securities, including common stock, preferred stock, debt, convertible debt and warrants. As of December 31, 2018, we have sold $3,435,775 (2,452,900 shares) of common stock under that registration statement. Subsequent to December 31, 2018, in February 2019 we issued 6,282,400 shares and 1,570,600 warrants to purchase common shares under our S-3 registration statement. Additionally, in a private placement we issued 714,286 restricted common shares and 178,571 warrants to purchase common stock. Sales of a substantial number of shares of our common stock, or the perception that such sales may occur, may adversely impact the price of our common stock
We have never paid and do not intend to pay cash dividends in the foreseeable future. As a result, capital appreciation, if any, will be your sole source of gain.
We have never paid cash dividends on any of our capital stock and we currently intend to retain future earnings, if any, to fund the development and growth of our business. In addition, the terms of existing and future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
Provisions in our certificate of incorporation, our by-laws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.
Provisions of our certificate of incorporation, our by-laws and Delaware law may have the effect of deterring unsolicited takeovers or delaying or preventing a change in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. These provisions include:
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the inability of stockholders to call special meetings; and the ability of our Board of Directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could include the right to approve an acquisition or other change in our control or could be used to institute a rights plan, also known as a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our Board of Directors; and
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limitations on filling of vacancies could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our company.
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In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years, has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The existence of the forgoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
If we fail to adhere to the strict listing requirements of NYSE American, we may be subject to delisting. As a result, our stock price may decline, and our common stock may be de-listed. If our stock were no longer listed on NYSE American, the liquidity of our securities likely would be impaired.
Our common stock currently trades on the NYSE American under the symbol “MLSS”. If we fail to adhere to NYSE American's strict listing criteria, including with respect to stock price, our market capitalization and stockholders’ equity, our stock may be de-listed. This could potentially impair the liquidity of our securities not only in the number of shares that could be bought and sold at a given price, which may be depressed by the relative illiquidity, but also through delays in the timing of transactions and the potential reduction in media coverage. As a result, an investor might find it more difficult to dispose of our common stock. Any failure at any time to meet the continuing NYSE American listing requirements could have an adverse impact on the value of and trading activity in our common stock.
Currently we are not in compliance with NYSE America Exchange, Stockholder Equity listing requirements. We filed a plan to regain compliance in December 2018, which the NYSE American Exchange has accepted. Under the plan, we will review our progress to regain compliance with the staff of the Exchange on a periodic timetable during the period covered by the plan. Failure to adhere to the plan or regain compliance status with NYSE America Exchange requirements will result in the Company's shares being delisted from NYSE American Exchange.