Good day, everyone, and welcome to Milestone Scientific Inc. Third Quarter 2026 Financial Results and Business Update Conference Call. At this time, all participants are placed on a listen-only mode. If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to hand the floor over to your host, James Carbonera with Hayden IR. Sir, the floor is yours.

Thank you, Operator. Before we begin, please note that today's call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our earnings press release, as well as our filings with the SEC, including our 2025 Form 10-K, for a discussion of these risks. A replay of this call will be available shortly after its conclusion. With that, I'll turn the call over to our CEO, Eric Hines.

Thank you, James. Good morning, everybody, and thank you for joining our call today. Our third-floor results reflect continued execution of our commercial strategy and disciplined cost management. Total revenue was $2.2 million, as expected, a modest sequential decline following the two large international orders that benefited our second quarter. Medical segment revenue grew 136% year over year. Gross margin improved 280 basis points to 72.3. And operating expenses declined 15.3%. Net loss narrowed to 748,000 from 1.2 million a year ago. And just as importantly, our team identified approximately $400,000 in additional annual savings which we believe supports our expectation to approach or achieve profitability in the fourth quarter of 2026. So I'm just gonna reiterate that one more time. Our expectation to approach or achieve profitability in the fourth quarter of 2026. In our medical business, our priority is converting growing interest and copy flow into sustained clinical adoption and recurring disposable revenue. We are gaining traction with major healthcare organizations highlighted by the initiation of clinical use at Rothman Orthopedics, a nationally recognized orthopedic institution with 34 locations. During the quarter, we also added pain and spine specialists spanning 22 locations across four states and its medical director, Dr. Sudhir Rao to our copy flow advisor program. To support that adoption, we are expanding our commercial infrastructure. We now have more than 500 U.S. commercial leads supported by five dedicated medical sales professionals, approximately 15 sales consultants, and three distribution partners, and Red One Medical, who provides access to federal healthcare customers, including the VA and the Department of Defense. The medical business opportunity is significant. There are an estimated 30 million plus epidural procedures annually worldwide, including more than 11 million in the United States. For illustrative purposes, just 2% penetration of the U.S. market at an assumed selling price of $150 per procedure would represent approximately $33 million in potential annual disposable revenue. That is not a revenue projection, but it shows the size of the market. Beyond epidurals, we recently submitted a provisional patent application for a new use of CompuFlow in intrathecal pump refills. and internationally we are pursuing go-to-market and licensing initiatives with a few large medical technology organizations. Our dental business remains an important foundation for growth. Online product demonstrations more than doubled compared with the same period last year, reflecting stronger customer engagement. We are also accelerating our market expansion strategy through discussions with four major dental distribution channels that collectively served thousands, if not ten thousands, of dental offices, positioning us to reach previously untapped markets and drive broader adoption. We also strengthened our balance sheet by converting our outstanding director loans to equity, leaving us debt-free as of September 30th. In addition, we evaluated and optimized our contractual obligations under an existing agreement, which lowered the related expense to approximately $91,000 for the first nine months of 2026 from $350,001 in the prior year period, and it is a source of additional annual savings I mentioned at the start of the call. Looking ahead, we are reaffirming our 2026 outlook of a range of $9.8 million to $10.2 million, representing double-digit growth, and we continue to expect significant growth in CompuFlow sales. We believe we are approaching an important inflection point. Based on our current visibility, we expect to approach profitability or be profitable in the fourth quarter of 2026. For 2020, we expect considerable lower costs than this year, and we expect to deliver additional profitable quarters, although results may vary from quarter to quarter depending on revenue levels. With our lower expense base, we believe quarterly revenue of approximately $2.6 million to $2.7 million puts us near the threshold where incremental revenue begins to flow meaningfully to the bottom line. That operating leverage combined with growing medical adoption and recurring disposable revenue creates what we believe is a path to sustained profitability and long-term value for our shareholders. With that, I'm going to turn the call over to Keisha to review our third quarter financial results. Keisha?

Thank you, Eric, and good morning, everyone. Total revenue for the third quarter was $2.2 million compared to $2.4 million in the same period last year, a decrease of $140,000, or 5.9%. The year-over-year decline was primarily driven by lower dental product sales, partially offset by the growth in the medical sales and high dental repair income. Gross profit was $1.6 million consistent with the prior year period. Gross margin improved to 72.3% compared to 69.5% for last year, primarily reflecting lower product costs. Operating expense decreased by 15.3% to $2.4 million compared to 2.8% in the third quarter of 2025. This reduction was primarily driven by lower salary, compensation, Stock-based compensation, professional fees, contract-related expenses, partially offset by higher marketing, regulatory, warehousing, and travel expense. Operating loss was $746,000, an improvement compared to the operating losses of $1.1 million for the prior year. This improvement was driven by a robust gross margin and ongoing efforts to managing operating expense. Net loss for the quarter was $748,000 minus .01 per share compared to the net loss of $1.2 million. Turning to our balance sheet, as of September 30th, we had $1.3 million in cash and cash equivalents, working capital of $3.5 million, and no outstanding debt. With that, I'll turn it back over to the operator for questions.

Certainly. Everyone else? This time conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing a question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. And once again, if you have any questions or comments, please press star 1 on your phone. Your first question is coming from Bruce Jackson from StoneX.

Your line is live. Hi, good morning. I just wanted to start with the gross margins that ticked up nicely here sequentially. Is this something that is sustainable going forward, and how should we be thinking about that particular line item?

Hey, Bruce, thanks for your question. We actually talked with Keisha about that this morning. So I would expect that we will fall back into the 70% range. It's a blended rate, of course, between the equipment and the disposables. We have some quarters where we have larger equipment sales, specifically when we're selling into China, large orders into China. So I would expect that the proper representation of the gross margin is in the 69 to 70% range moving forward, although there might be some occasional fluctuations to the positive there.

Are there any seasonal trends in your business? I mean, you've got a lot of potential contracts lined up here, and fourth quarter can generally be strong for capital equipment sales. Is that what you're seeing right now this year?

Yeah, there's a little bit of seasonality just from the dental business. There's a lot of people that are, especially in Europe and so forth, on vacations in the summertime frame. So for the fourth quarter, Generally, it's a strong quarter. As you mentioned, Q1 is generally strong. Q2 can slow down a little bit in Q3, but for the most part, Q4 is a strong quarter.

Okay. Great. That's it for me.

Thank you. Thank you. Your next question is coming from Steve Higgins. Your line is live.

Hey, Eric. We haven't talked in a while. How are you doing?

I'm doing great. And you?

I'm doing good. I just had a question on the dental side. I know about two quarters ago there was mention that three or four pretty big countries, including India and Japan, I think Mexico and one other, but we were about 80% along the path to approval and hadn't heard any updates on that. So can you kind of update us on that and are we expecting that within the next year or where are we on that?

No, it's a great question, Steve, for sure. So we have received, as of last week, approval in Turkey, right? I mean, so Turkey is a very substantial, large country. We're expecting orders if we've not already received one. So I believe I actually have already received an order from Turkey. So Turkey is now official, and we'll probably press release that at some point, I guess. Mexico is expected. It's a process. These things, unfortunately, are a bit of a process. Mexico, we're expecting the tail end of Q1. We've been in touch with our partner down there. I spoke with them, believe it or not, last week. And so we're making our way through that. And India, also expected in Q1. So those are the three that I think I mentioned. Japan, I think we're holding off for just a little bit. We've got approvals in 41 countries and a handful of countries where we're not selling as much as I'd like us to sell. So we have more than enough Thank you. Your next question is coming from John Korb. Your line is live.

Good morning, Eric. Nice to be on the call with you today again. I have a couple of general comments. I want you to know, first of all, that when you send out a press release, I read them every time with anticipation, and often I reread them. You use words that I've never seen in a press release from Milestone, like profitability, Thank you for joining us. but to establish CompuFlow as a repeat use technology embedded in everyday clinical practice. That's it. I think that's been the stumbling block, the milestone for years that at least in the dental business, the devices were placed and not used or used very limited way. And so when I read that, I said, well, we got a guy at Milestone who's really focused and knows how to approach the growth for Milestone Scientific. I'm really grateful for your focus and all you're doing so far.

No, I appreciate it. And you're spot on, right? So, you know, if you look at, you know, we have this conversation internally and we're looking at it very closely because there's a balance between bringing on new clinics and a balance between Thank you for having me. So we're trying to strike a balance between bringing on new customers. And I'm talking a little bit about 2027 because we'll approach 25 to 50 CompuFlow purchasers by the end of the year more than likely. And then we need to decide is it more about educating and training and continue to reach out and touch our existing customers as much as it is to go after additional new sites. So we're thinking about that very carefully. because at the end of the day, having 25 units that are being used out in the field translates to about $2.5 million in revenue. And so we will have that many users out there. We need to make sure that they continue to use and are successfully the product. So you're spot on.

Okay, that's great. One more question. When you place these devices with, let's say, Rothman and Payne & Spine Specialists, How is that going? I mean, is it painfully slow? Is it better than you expected? Are there stumbling blocks you didn't expect? Or is it just the way you envisioned?

Another thoughtful question. So the answer is it depends a little bit. So some embrace it very quickly and use it very successfully. Others have a little bit of learning curve and comfortability of using the product. So it really depends on the practice. But I would say that one of the areas that we need to spend a little bit more time and energy is, again, back to the earlier comment, is making sure that we continue to reach out and touch and provide training and so forth, whether it's videos or not. One of the slight constraints If there is one, it's just having resources out in the field trained to be going back into the offices routinely to make sure that everything's working properly, that they feel comfortable in providing tips and so forth. One of the things we'll be focusing on a little bit more is the education part and the maintenance of these units that are out in the field because at the end of the day, the units are very We have plenty of them, but we need the ones that are out in the field to be used as much as they possibly can. So we need to be selective about the practices we choose or the hospital systems that we go after so that we can maintain them and also encourage them to continue using. So I think what we'll do is have a little bit more of a strategic focus on some of the larger practices that you're seeing. For instance, Rothman Institute, they do 3,000 intralaminar Medicare procedures per year. So, you know, you do the math there, and if they were to use it for all the procedures, it's about $450,000 a year. So, you know, I think if we focus a little bit more on some of the large pain consortia in hospital systems while we continue to go after the additional max that we need, that will be striking the right balance and also focusing some time and energy on education and continuous training.

Great. Thank you so much, Eric, and continued good work. I look forward to good things from you and Milestone. I'm very appreciative as a shareholder.

Thank you, John.

Thank you. And once again, everyone, if you have any questions or comments, please press star then one on your phone. Your next question is coming from Anthony Vendetti from Maxim. Your line is live.

Thank you. I just wanted to focus on the medical side So I think you said you have five dedicated medical sales people. Did you say 500 leads that are out there right now on the medical side?

We do, yeah.

Okay. And right now, I guess around 100,000 is from medical sales in this quarter. How much of that is recurring disposable revenue versus new sales?

I would say right now it's skewed toward new sales, you know, probably 85%, right? I mean, so a lot of these folks, you know, the process for, you know, getting the contract in place and then getting these folks trained and then having them start doing cases with some on-site training and then beyond that to start submitting cases to Medicare for reimbursement, you're looking at a four to six month time window, right? So, When we announced a new organization like Dr. Rao, which was a couple, maybe 30 or 40 days ago, his team literally was going through training the last two weeks. And it's not a two-week training, but it's people on-site doing cases with the doctors. So you have a lag of about 30 days between when they sign the agreements. Then you have between two weeks to four weeks for some training. And then you have The Office Staff Submitting to Medicare, which can be, you know, another few weeks because they're not always right on top of the, you know, real-time Medicare cases. And then you wait for reimbursement, right? And so given that this is so new and given that these people are, you know, sort of waiting to see what they get back, and for the most part they're getting back the full $325, there's about a, you know, four- to six-month lag between new sales and recurring revenue. So right now, we've been focused mostly on new sales and bringing doctors on board. And I don't think that the recurring will really start to be a significant portion of the revenue, probably until mid-Q1 of next year and Q2. And so does that answer your question, Anthony?

Yeah, absolutely. Very helpful. And then I know right now the focus is mostly on pain management, and maybe that market is – and more difficult to quantify. But when you said epidural procedures, were you talking total epidural procedures including OBGYN or were you speaking specifically of a particular epidural market when you said 30 million epidurals, 30 million globally, 11 million U.S.?

Yeah, I believe that's the total number which includes all the different markets for that. but the number is so massive that any small little proportion of any piece of it, whether it be pain or L&D or intrathecal pump refills, encapsulates a massive market. And we plan on very much so, and we're talking to some different very large strategic partners about labor and delivery because we think that that's a home run, quite honestly, for CopyFlow, a little bit more of a complex sale. That's why we've pivoted a little bit to pain where it's a little bit more fragmented and faster turnaround. But labor and delivery can be a massive market for the company, as can intrathecal pump refills, which are about 400,000 pump refills every year. So I believe the number of the 30 million and 11 million respectively are the comprehensive epidural procedures globally.

Okay, great. Thank you so much. I'll hop back in the queue. Appreciate it.

Thank you. And that concludes our Q&A session. I'll now hand the conference back to Eric Hines for closing remarks. Please go ahead.

So folks that joined the call, I appreciate you doing that and appreciate your support. For those of you that are shareholders, I'm assuming it's most everybody, I can't thank you enough for being a shareholder. This is a new chapter for the company. We are now in a place where the operating leverage for the company throws any incremental revenue to the bottom line. I think as you've seen by the comments I made in prior calls, I said we were going to hope to approach cash flow break even sometime in 2027. Well, if things hold true and we pull off profitability in Q4, which we're going to do everything we can to do that, I think that the future is very bright here. And like I said, thank you for your patience. Thank you for your support. and welcome to the new chapter of Milestone. Have a great day guys.

Thank you. Everyone this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.