Q4 2019 Earnings Call
Greetings and welcome to the milestone scientific 2019 year end business update at this time all participants are in listen only mode. A question answer session will follow the formal presentation.
If anyone to require operator assistance during the conference. Please press star zero on your telephone keypad.
It is now my pleasure to introduce your host to tell you about <unk> of Crescendo Communications. Thank you you may begin.
Thank you Donna the morning, and thank you for joining multiple signed 6019 your financial results conference call on the call with US today Arlon offer interim Chief Executive Officer, Joseph Yeah Casino, Chief Financial Officer. The company issued a press release yesterday Monday March Thirtyth containing 2019 year and financial risk.
Okay, which is also posted on the company's website you have any questions. After the call or would like any additional information about the company. Please contact crescendo communications out to one to 671 102 zero the company's London I will now provide prepared remarks toward the end of financial and operational results for the year on December 31st the thousand nine.
Team before we get started we would like to remind everyone that during the conference call. We may make forward looking statements regarding timing and financial impact mothballed ability to implement a business plan expected revenues on future success. These statements involve a number of risks and uncertainties and are based on assumptions evolving judgments with respect to future economic competitive.
Market conditions, and future business decisions, all which are difficult or impossible to predict I currently and many of which are beyond milestones control. Some of the important factors that could cause actual results could differ materially from those indicated by the forward looking statements our general economic conditions Miller to achieve expected revenue growth changes in our operating expenses.
First time wrong.
Our legal developments competitive pressures changes in customer and market requirements and standards and the risk factors detailed from time to time and milestones periodic filings with the Securities and Exchange Commission, including without limitation milestones report on form 10-K for the year ended December 31st without the 19th both looking statements made during this call are based upon.
Management is reasonable belief as of today's date at March 31st 20, Funny Muslim undertakes no obligation to revise or update publicly any forward looking statements for any reason with that we will now turn the call over to one offs are in term Chief Executive Officer. Please go ahead one.
Thank you Todd and thank everyone for joining us today.
We had made considerable progress in advancing our comp you flow epidural system in 2019, our primary focus in 2019 was successfully trialing our comp you pulled epidural system in multiple hospitals and medical schools, placing the system with key opinion leaders continuing important.
Good studies and working with Anesthesiologists U.S. Europe actually.
These when necessary first steps in order to establish credibility before institutions would formally adopt and begin broader deployment of the comp you flow epidural system. We continue to received positive feedback and the comp you flow epidural system has exceeded our expectations with over 2000 successful procedures today.
Great.
This is a significant achievement compared to the traditional wants a resistance technique, which has a high mid of medical risk.
And associated morbidity.
Nonclinical studies were published which further validated the comp you flow epidural system's ability to safely and effectively identify the outdoor space.
We have strong clinical data.
Showing a reduction in epidural punctures and complication rates by using the epidural.
Comp you flow system I've seen a new both study published in the opening journal of Anesthesiology.
October 2019 in which 600 cases were completed without a single Doron puncture.
Oh puncture is unknown risk of epidural anesthesia and occurs when the needle accidentally punctures the door.
Because the anesthesiologists does not recognize the location of the needle in the space.
Resulting in the Likud leakage absurd cerebral spinal fluid.
This can lead to severe headaches.
And other significant Morbidities Rick.
Wiring additional procedures and sometimes significant additional cost.
This in several other studies have proven to validity of the comp you flow epidural system, which not only benefits patients, but also should lowered the cost associated with treating these complications up until now there had been no other available procedures and labor and delivery the president standard of care utilize.
This is the hypodermic surrenders developed in the 18 sixties with a tick neat developed in 1921.
Our unique computer controlled real time pressure sensing technology provides anesthesiologists, an objective unquantifiable technique to build confidence and success.
We have begun speaking with group purchasing organizations in order to obtain approval of the comp you flow epidural system within their facilities.
The GP always represent a sizable opportunity since some of these group have hundreds of hospitals within their network.
Once we obtain approvals it should shorten the sales cycle and open us up to larger markets at the end of the day or technology is about providing the best possible care for patients.
We strongly believe that our technology has the potential to true to transform the industry and ultimately become the standard of care, replacing.
The hypodermic syringe.
Turning now to our dental business.
We saw a decrease in sales, which was largely related to would decrease in sales in China.
Due to the current cobot 19, pandemic and to reduce the hours and closings of dental offices throughout the world, we anticipate that or revenue for the second quarter and possibly the third quarter may be affected.
However, it is too early to determine what the second or third quarter impact will be what the effect of cobot 19 may have on our revenue.
We have <unk>, however, maintain a substantial inventory in the United States to prevent any disruptions and shipping.
At this point I'd like to turn the call over to our CFO COO Joseph They Agnes Dino go over the financials in detail, but I will be back at the conclusion of Josias discussion. Please go ahead John.
That's 200 total revenue for the year ended December 31st 2019 was 8.4 million versus 9.6 million for the same period last year.
Into revenue for the 12 months ended December 30, Onest 2019 was approximately 8.3 million versus 9.5 million for the same period last year.
Total revenues decreased by approximately 1.2 million, which was related to a decrease in sales to China of approximately 741000.
Decreased device and Handpiece sales in the United States in Canada.
Approximately 256000 and a decrease in international sales by approximately 118000 in 2019 compared to 2018.
[noise] domestic inventory purchases by Henry Schein have been reduced due to lower target inventory models within Henry Schein. However, in the domestic market or exclusive distribution agreement with Henry Schein continues to pay off as the sell through has been consistent.
Oh medical revenue for the 12 months ended December 30, Onest 2019 is approximately 38000 versus 120000 for the year ended December 30, Onest 2018.
Gross profit for the year ended December 30, Onest 2019 was 5.7 billion or 68% of revenue.
Versus 4.4 million or 46% of revenue for the year ending December 31st 2018.
Okay.
During 2018, the company recorded a reserve of approximately 1.2 million to the underlying inventory associated with deferred costs due to the milestone China's market underperformance in liquidity constraints.
Operating loss for the year ended December 31st 2019 was approximately 3.9 million versus approximately 7.9 million for the year ended December 30, Onest 2018.
Operating loss for 2018 included a 1.5 million.
Paramount of long lived assets related to non core patents.
In 2019, the company incurred a non cash expense of approximately 3.65 million due to shares in warrants issued in public and private or firms as well as other issuances of common stock during 2019.
For which the company did not have sufficient number of authorized shares of common stock to cover the exercise in issuance of approximately 5.85 million outstanding equity instruments.
After the impact of the derivative liability. The net loss was approximately 7.5 million or 16 cents per share for the year ended December 30 Onest two.
2019 versus a net loss of 7.4 million were 21 cents per share for the comparable period in 2018.
Now I'd like to turn our attention to quality and capital resources.
As of December 30, Onest 2019, the company had cash cash equivalence of 1.5 million.
Total current assets of approximately 6.1 million and working capital of 1.2 mode.
At this point I like to turn call back over to Leonard Leonard Thank you Joseph.
We believe that our technology can be used for variety of epidural procedures and other medical applications. However, our initial focus is on the labor and delivery market.
With close to 4 million births in the U.S. each year, we believe the risk factors and potential liability associated with the traditional loss of resistance techniques make this market ideally suited to a new technology to replace the loss.
Oh pressure technique, which utilizes as I've said, the 18 60 syringe.
In terms of the broader epidural market over $5 billion and spent annually on epidural injections in the U.S. alone.
With over 11 million epidural procedures performed each year in the U.S. and over 30 million worldwide.
Importantly, we continue to evolve and innovate on technology in the beginning of 2020, we announced that we received a notice of allowance from the U.S. patent and trademark office for keep patent on the comp you wave technology, which is being integrated into the comp you flow epidural system.
Utilizing a high resolution in line pressure sensor in combination with unique data processes within the comp you blow system makes it capable of detecting both the insitu pressure as well as the presence of a poster child pressure wave form.
The postal tidal wave form is representative of the detection of pressures that are produced by the cardiovascular system either directly or indirectly. This in turn can be used to aid in the identification of a needle or a catheter within an anatomical structure such as the.
The girls space, but not limited to the Epidurals space.
This advanced and breakthrough technology provides further indication of the epidural placement and real time notification of obstruction or displacement of a catheter.
Which presents our company with a.
Broad and you market.
We believe the comp you wave technology represents a breakthrough for the comp you flow epidural system. This technology also has other medical applications and we are planning to incorporate this innovative capability into future medical instruments for other indications as well.
This patent provides IP protection around the comp you flow instrument for another 20 years, which further enhances our position at the forefront of the computer polarized injection market.
So to wrap up we are encouraged and optimistic for the future of our company.
I'd like to thank you for joining the call today at this point, we would like to open the call to question.
Thank you Sir the floor is open for questions. If he would like to ask a question. Please press star one on your telephone keypad at this time.
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Once again, that's star one to register questions at this time.
Our first question is coming from Anthony Vendetti.
Oh Maxim Group. Please go ahead.
Thank you.
Morning.
Good morning, Anthony.
Hi, good morning, ladies and gentlemen, so I.
I'm glad to hear that we have nine clinical studies that were or were published.
No that.
I was just wondering what with the current you know cobot environment I know, it's going to impact dental since that's.
You know considered obviously non essential or non emergency I'm sure a lot of attempt to sort out going to be.
Hi, doing as many procedure somebody may be closing down I was wondering what your thoughts are on how it's going to impact the rollout of the epidural a product as well.
Well.
For the very near future I believe for the next two quarters.
It probably will have a moderate effect not a not a very significant effect because.
We are already in quite a number of hospitals that have already trial.
The unit, what and what they are waiting for as I've said in the past.
Is to shorten the time to use our disposable.
To use our present disposable.
Requires approximately one to two minutes to set it up the anesthesiologists generally in the United States felt that that's much too long.
Because they have the family there the husband there the women's and labor. So they want something very simple in other words plug and play.
So we have now been working on assembling.
Those three parts together.
Which we've now done a we are going to do a let us letter to file for this with the F.D.A. and they should be ready.
Within a matter of a few weeks.
Or sooner we've had a setback in that for it or a different reason, but we believe that that that's a permanent and perhaps even oh, we could chew away.
That is what are the hospital, the anesthesiologists up and waiting for as far as the up a girl goes so I. So as soon as that is completed.
Oh, we will be able to go back to that group of hospitals with the with the enhancement that they've looked for.
So I don't think that we should be significantly affected in the following quarter. However, as you're aware no vendors in the United States are allowed in hospitals now so we will not be able.
To meet in person with any groups are anesthesiologists in a hospital environment.
So that will affect us going forward, depending on how long that remains in effect.
The the other issue is we have discovered or the other market, which I mentioned, which was catheter placement what happens.
Is the next day when another anesthesiologists is doing the rounds.
If a patient is not receiving pain relief and what what it is is there was a catheter that is that has been placed.
After.
At the time of the original epidural.
The patient then it's moved two or three times that moved out of the operatory their moved onto removable bed that moved.
To recovery than that put on a movable bed a couple of hours later than that moved once again into a bed. So the chance of catheter displacement.
Is this apparent however, there can be two reasons why.
The patient is not receiving.
Drug from the pump with the pain relief medication runners, which the medication is is <unk>.
Not substantial enough, there's not an north of the lie decaying or whatever it is there they're using to reduce the pain or the catheters been this this launched.
That problem.
As ascertained by the Amnesties is anesthesiologist, putting a launch bolus or launch amount of that anesthetic solution.
To the patient waiting 20 to 40 minutes for that patient to receive pain relief if the patient as we see pain relief then the determination is made that there was not enough drug.
If the patient has not received pain release, which I'd, which I believe from what I'm told as the case most of the time the catheters become dislodge. So this is a very costly period of time it could be 20 to 40 minutes.
Then if it is this launched another epidural has to be done so its quite costly for the institution.
We have shown that we can make that determination in less than 10 seconds as to whether the catheter has been dislodged are not which is of significant value. According to the anesthesiologists that we spoke to both of the patient of course, the anesthesiologists and the institution and the cost factor.
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We had been working on.
Another letter to file for Quickstart program that will allow us to utilize this for the catheter placement.
And ace and a slight change into disposable to accommodate a.
Different pressure transducer with a longer to in order to reach the pump that used to pump in the medication.
She also has been in process now for a couple of months and we expect a expect the result of this will be a letter to file not a five 10-K in our belief and this will be done in a matter of very few weeks.
Does that answer your question Anthony.
Yeah like they did that was the departed yesterday. So this is a letter to file typically how long does the F.D.A.
This is just a slight.
The change how long does it take typically for the FDA to respond to that they don't they don't respond it's a letter to file in other words we.
As the company make a determination that this is in fact the letter to file not a five 10-K, we then go to our consultants.
Who either agree with us or not.
In this case they agree with US and then we do a letter to file so the after the FDIC is not involved in that in the event that during our next review by the FDIC. They feel that it should have been a 510 played and that's another issue, but in these two cases, which I just mentioned.
We believe it's a letter to file as the wall consultants.
Interest rate change in other words.
For the cap, it or where do a quickstart program. So we're eliminating some screens on the computer or on the but basically it's still the same location as far as a disposable goes we're really went through into two.
So to speak so that it can reach the the pump. So we believe these are very simple modifications that would require only a letter to file.
Okay. That's it that's helpful. So is it the old the old way. It took one to two minutes to set up now that you've assembled all three parts together.
What is the time now is reduced to approximately one.
Really nothing they just have to open it can plug it in.
Okay. So literally seconds first is once two minutes correct correct. Okay. There are other doctors throughout the world that to using <unk> product for example in the clinical studies, they're doing this in vivo you know the doing it on on patients and labor that's not even mention this is being a problem, but in the United States a it has been a.
It has been a major issue for anesthesiologists.
Okay, and you mentioned be a cokemaking impact on the second and third quarter.
You know they you know what am I companies also mentioned, obviously it impacts in the first quarter, particularly particularly the month to month of March or did you did you see a similar impact on the data side of the business and in the month of March a slight impact I'm not so much or not.
So much in March.
But we anticipate obviously in the second quarter, we don't know for the third quarter, because we don't know the timing.
Right.
Okay. Good. Thanks, that's helpful. I'll go back in the queue. Okay. Thank you very much Anthony.
Once again, ladies and gentleman that a star one to register a question at this time.
Next question is coming from James Terwilliger.
Northland Securities. Please go ahead.
Hey, Lynn can you hear me, yes, James good morning.
Good morning to you and thanks for taking my questions I've got two quick questions I'll start with the dental first.
In terms of Henry Schein in the past, we've talked about Henry Scheins sales force and that would be my first question has there been any change in the Henry Schein sale. There's nothing you can do about the virus and there's certainly some things here for every company that's out of your control, but on the dental side of the business has there been any change in.
The sales force or the investment that Henry Schein is making a bigger dental business and then in the past sometimes Henry Schein took some inventory as we went into a new calendar year. I believe there was price increases are there any price increases or anything else that you can discuss in terms of the dental business with Henry Schein the set aside the.
Slowdown, which has nothing to do with your ability to execute.
I don't see it but Joseph there's much closer to that than I am Joseph.
Sure.
On the on the personnel side the exclusive group.
This is the exclusive sales group for Henry Schein has increased from approximately 25 to 32 ish 34 ish people. So we have new people that we training Unfortunately with the epidemic we can't get those people into the field working with the end user.
Which are the dentist. However, they have increased or says we see that from our side that the new staff is energetic and ready to go.
Being held back by the situation that we have with the coded virus as far as price increases effective January 1st the dish. This year, we've increased our price to dentists throughout the world by approximately 3%.
Over 2019.
And it has at least for the first quarter, it's been holding itself and without a problem and it looks like or we will continue on in that process without a price reduction for the rest of the year.
Good good all things considered that is well positioned in terms of what you can control one and thank you. Joseph My second question is going to go back to that.
GPO contract and my question here as many times those are either sole source or dual source am I thinking about this correctly you really don't have a competitor besides the syringe.
So do you would be I mean, even if they said you're a dual source on a G.P.O. It would be you and the syringe and then secondly, what is the timing assuming you would get a G.P. of position and a contract be awarded when does the G.P.L. contracts go into effect.
Well as as you know, we we never know timing unless we're in total control of it into this case, we're not we're in discussions with a G.P. I was at the moment.
Let me, let me first characterize that other than warning G.P. all that we knew that were speaking with that it's also the insurance company ended G.P.O. or the other the others or buying groups. So basically when one.
Has the contract with a G.P.O., it's a license to hunt, it's it's not a sale. So having said having said that a we're in discussions now it'll probably be a as a unique product without any competition to answer. Your question then it's as fast as they.
They can move we're hoping that we're looking at no no more than two months, but given what's going on in the world. It's it's impossible to give a timing because it's totally in their control.
So would they just add your update the GPL contract, which again is a license to hunt I mean do you still have to do the work at the hospital level, but what they do they come out with a brand new contract with with a like a master list of technologies or would they just add you.
To the current contract that's an effect it depends on the G.P.L. it depends on NPL. There, it's either one of those two or depending on which G.P. or what is they can they can also mandate that the product be used.
So there are three alternatives not too.
Okay and things like the very launch GPR was the ones with 3400 hospitals don't do that but there are smaller ones that could do them.
Alright, and getting those contracts are very important so keep up the good work. Thanks, when I'll jump back in queue. Thank you. Thank you James.
Once again that star one to register a question. Our next question is coming from Patrick Metcalf Newbridge Securities. Please go ahead.
Good morning, Lynn Good morning, Patrick how are you I'm doing well I wanted to ask going into the end of 2019, you were pretty confident that within weeks, you would get some sort of hospital wins or something.
And then that got delayed I'm, assuming it was the modifications to the company flow.
Well disposable is that correct.
It was the modification in the first instance.
To the disposable.
Okay and it was also the modifications to Quickstart program. When we did the computer originally we made it very very safe kind of like.
When you're.
When you entered the country on global entry you have a number of screens and you say no I don't have more than 10000 are you sure you don't I'm sure. We don't you absolutely sure you know that kind of thing to make it very safe. The anesthesiologists don't want that they want to press the button and get to work right away. So we had to modify.
Why that in order to modify that one has to change the so the software that then one has to.
Do a letter to file and where you're in agreement with your consultants and sometimes you have notified body. So it's it's a process.
Okay. So I guess my question is is going to circle around it seems like back in November October you're dealing with one hospital or just individual hospitals today. It seems like you're dealing with jeep yields which represents hundreds if not thousands of hospitals. So my question is.
Beyond the told you modify this.
Well give you entry into hundreds of hospitals or was it more single hospitals that were pointing you in that direction.
The remainder it was individual anesthesiologists.
Okay, Okay, great and remind everybody end user.
That caused us to make these modifications.
Okay, Great and then where do you stand on possibly working out something with the dental group spending it off licensing it out or selling it.
I can let you know further on that but I can't I cant today. It it isn't it it is our strategy to sell off the dental group.
But I cannot speak to today, I'm, sorry, but I will be able to speak to it very shortly.
Okay, and then I'm not trying to give you any indication either way, though Patrick.
No I understand where coal that that things could be held up in this environment. So the fact that you can even speak to it is great news and then.
I guess, that's all that's all my questions have a good okay, Patrick stay safe. Thanks.
Okay.
Thank you I'm showing no further questions. So at this time and would like to turn the floor back over to management for any additional or closing comments.
Okay, I would like to thank everybody for joining the call. We are doing in a very difficult situation for everyone not just us the best that we possibly can in this situation.
We are continuing.
Through this situation.
With a research and development and believe [laughter], but as we have in the past.
We will continue to leapfrog ourselves, making the technology easier.
More profitable.
For the shareholders. Thank you very much all the best safe.
[laughter].
Ladies and gentlemen, thank you for your participation.
Today's event you may disconnect your lines at this time and have a wonderful day.
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