Milestone Scientific Inc (MLSS) 2015 Q4 法說會逐字稿

Good day and welcome to the Milestone Scientific Incorporated year-end 2015 investor conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Natalya Rudman. Please go ahead.

Thank you, Eric. Good morning and thank you for joining Milestone Scientific's fourth-quarter and year-end 2015 financial results conference call. On the call with us today are Leslie Bernhard, Chairman of the Board, and Joseph D'Agostino, Chief Financial Officer and Chief Operating Officer. Unfortunately, Leonard is not available because he is traveling in India where he is meeting with potential distributors for our medical and dental instruments and accessories. As a result, he's not able to participate on the call and asked that Leslie present the business overview and closing remarks from Milestone Scientific today.

The Company issued a press release on Thursday, April 7, containing fourth-quarter and year-end 2015 financial results which is also posted on the Company's website. If you have any questions after the call or would like any additional information about the Company, please contact Crescendo Communications at 212-671-1020.

The Company's management will now provide prepared remarks, reviewing the financial and operational results for the fourth quarter and year ended December 31, 2015.

Before we get started, we would like to remind everyone that during this conference call we may make forward-looking statements regarding timing and financial impact of Milestone's ability to implement its business plan, expected revenues and future success. These statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond Milestone's control.

Some of the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are general economic conditions, failure to achieve expected revenue growth, changes in our operating expenses, adverse patent rulings, FDA or legal developments, competitive pressures, changes in customer market requirements and standards and the risk factors detailed from time to time in Milestone's periodic filings with the Securities and Exchange Commission including without limitation Milestone's report Form 10-K for the year ended December 31, 2015.

The forward-looking statements made during this call are based upon management's reasonable belief as of today's date, April 11, 2016. Milestone 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 Leslie Bernhard, Chairman of the Board. Please go ahead, Leslie.

Thank you, Natalya, and thanks to everyone for joining us today. Although our revenue declined compared to the same period last year, our revenue improved sequentially and our gross profit increased compared to the same period last year. Moreover, we are making continued progress implementing a number of sales and marketing initiatives that will enable us to resume growth of our dental instruments in 2016.

For the fourth quarter of 2015, we experienced a net loss of $1.4 million or $0.07 a share which reflects increased investment in sales and marketing for the dental instruments as well as increased expenses related to the development of our medical instruments.

Heading into the first quarter of 2016, we are now seeing the positive impacts of these initiatives and anticipate improved revenue for the first quarter of 2016 as well as the full year.

As discussed on our last call, we implemented a number of significant changes in our sales and marketing strategy which take time to fully implement before we begin to see the benefit. But we are now seeing the impacts of those initiatives. We are also investing very heavily in our new medical instruments, which we believe represent the future of the Company.

Turning first to our dental instruments, as I mentioned, we are now seeing the positive impact of our recent initiatives which will be reflected in improved revenue for the first quarter of 2016 and the full year.

We recently announced a new distribution arrangement with Henry Schein, the world's largest provider of healthcare products and services to office based dental, animal health and medical practitioners. In January, we received an initial stocking order from Henry Schein for the Wand STA computer assisted anesthesia system. This new arrangement enables us to leverage Henry Schein's field representatives and their unparalleled access, relationships and marketing platform in the professional dental segment. We believe this agreement significantly expands our reach in the US and Canadian markets.

In addition to our focus on the US market, our global sales initiatives for the dental instruments are taking hold and we are seeing positive results heading into 2016, especially in China. We recently announced a purchase order for 1000 dental instruments and over 7000 disposable handpieces from Milestone China, a joint venture distribution company between Milestone Scientific and a team of senior healthcare executives from China. The purchase order is valued at approximately $1.4 million and will be recognized in the first quarter of 2016. Based on the feedback thus far, we expect these purchase orders will continue to increase in 2016.

Wand Dental is also continuing to expand its international distribution network in existing markets while entering new markets. In 2015, one area of focus was South America. Between late 2015 and early 2016, we substantially defined agreements with important distributors in the region. Last year we successfully launched the Wand STA in the Chilean market and we are now ready to launch in Brazil, Mexico and Colombia with new distributors.

In Europe and the Middle East, we defined an agreement with an important distributor in Turkey and Israel. In 2016, we plan to open new countries with a focus on Europe and Asia and we'll continue to strongly support current and new distributors in the launch period with marketing and training activities.

In addition, we are continuing to focus on improving our training activities to increase the usage of our system among dentists.

Turning now to our medical instruments, our Epidural & Intra-Articular Subsidiary is well underway with its pivotal clinical trial in the US. The goal of this trial is to verify the placement of the epidural needle tip in the lumbar epidural space. As announced last week in our press release, we have nearly completed the clinical trials of our epidural instruments and have less than 40 patients remaining.

We made the decision to add two new sites in the US at leading universities. The trials at these two sites commenced last week and should be completed in May. Unfortunately the addition of these two new sites set us back on timing but we believe ultimately it will be very worthwhile and it will broaden the scope of this clinical trial.

We plan to start clinical trials in Europe with leading key opinion leaders later this year. We are also pleased to report that we have had abstracts on our epidural instrument accepted in some of the most prestigious academic journals in the US and Europe.

In November, we announced we had submitted initial results of our clinical trial assessing the CompuFlo technology in correctly identifying the epidural space during an epidural procedure to a prestigious European Pain Management Society in advance of this organization's annual meeting in 2016. Shortly thereafter we hosted an event in Miami, Florida for a group of leading anesthesiologists and key opinion leaders in the field. Professor Ralf Gebhard from the University of Miami, discussed the CompuFlo technology and its areas of clinical application. Dr. Gebhard also addressed the progress of the COMPASS clinical study.

In January, we announced in an abstract we had previously submitted to the prestigious Journal of Pain had been accepted for presentation and publication. The abstract has been accepted for presentation as a poster at the 35th Annual Scientific Meeting of the American Pain Society May 11b14 of this year at the Austin Convention Center. The abstract will also be published in a supplemental issue of the Journal of Pain.

Also in January we announced another abstract had been accepted to the American Society of Regional Anesthesia and Pain Medicine's 41st Annual Regional Anesthesiology & Acute Pain Medicine Meeting taking place March 31bApril 2 in New Orleans. Dr. Ralf Gebhard has been invited to present the findings of the clinical trial assessing the CompuFlo technology during a moderated e-poster session. According to ASRA, only the highest scoring abstracts are selected for moderated sessions.

The abstract will be published in the Journal of Regional Anesthesia & Pain Medicine that will coincide with this meeting.

Most recently in February, we announced that another abstract was accepted for presentation at the prestigious Euro Anesthesia 2016 Congress taking place May 28-30 in London. The abstract was authored by Dr. Douglas Dobecki, Diplomate of the American Board of Anesthesiology and a double board-certified anesthesiologist and interventional pain management expert from the San Diego Pain Institute. The abstract will be published in the supplement of the European Journal of Anesthesiology that will coincide with this meeting.

The reason for mentioning all of these abstract submissions, publications and presentations is to show that we are making tremendous progress. Key opinion leaders throughout the industry both in the US and abroad are not only taking notice of our instruments but featuring our instruments in the most prestigious publications and key events.

Upon completion of the clinical trials, we will conduct a statistical analysis which should take no more than one week at which time we will submit the final data to the US Food and Drug Administration.

We are in active discussions with additional distributors throughout Europe and look forward to announcing these in the very near future. However in order to negotiate the most favorable terms, we are holding off on signing the distributors until the FDA approval is in place.

Upon completion of the US clinical trials, we believe we will have the necessary supporting clinical data to support an aggressive North American and European rollout strategy. Although we are not required to conduct these trials prior to selling the instruments in Europe, many of the European distributors are waiting on the outcome of these trials for marketing purposes.

We have also submitted the required information to the US FDA for approval of the intra-articular instrument and are awaiting feedback, the timing of which is uncertain as this remains outside of our control.

In addition to Europe and the United States, we also have access to the China market by way of our Epidural & Intra-Articular Subsidiary which has entered into distribution agreements for both the epidural and intra-articular instruments with Milestone China, our 40% owned distributor in that country. These agreements include guaranteed minimum purchases. However, before distribution in the region can begin, we must first obtain CFDA marketing clearance.

At this point I'd like to turn the call over to our Chief Financial Officer, Joseph D'Agostino, to go over the numbers in detail and then I will be back at the conclusion of Joseph's discussion. Joseph, please go ahead.

Thank you, Leslie. Revenue for the year ended December 31, 2015 was $9.5 million versus $10.3 million for the year ended December 31, 2014. The decrease from revenue of approximately $841,000 or 8% was due to a decrease in instrument and hand piece sales. In the domestic market, total revenue decreased by $1.1 million due to a purchase of a large quantity of instruments by the domestic distributor at the end of 2014 before a price increase in 2015.

On the international front, total revenue increased by $308,000 to $5.9 million versus $5.6 million for the same period in 2014. The increase in international sales was due to the increase in sales to China.

Gross profit for the year ended December 31, 2015 was $6.4 million or 68% of revenue versus $6.7 million or 65% of revenue for the year ended December 31, 2014. Operating loss for the year ended December 31, 2015 was approximately $3 million versus an operating loss of approximately $790,000 For the same period last year. The additional loss of $2.2 million is primarily the result of a decrease in gross profit margin of approximately $300,000 (technical difficulty) increase in selling general and administrative expenses of $2 million. The increase of approximately $2 million in SG&A expenses is predominantly due to Milestone's addition of a president, a full-time CEO for Wand Dental, a senior business brand manager and a senior manager of project management. This staffing was provided to support the growth of Milestone Scientific's initiatives and the CompuFlo software for anticipated new medical and dental instruments.

Net loss for the year ended December 31, 2015 was $5.5 million or a loss of $0.26 per share versus a loss of $1.7 million or a loss of $0.08 per share for a comparable (technical difficulty) in 2014.

Net loss for the year ended December 31, 2015 includes a loss on earnings from the medical joint venture of approximately $2 million compared to a loss of $891,000 for the same period last year and a loss on earnings of Milestone China of $418,000 compared to a loss of $810 (sic - see press release, "$810,000") for the same period last year.

Now I'd like to turn our attention to the liquidity and capital resources. At December 31, 2015, the Company had cash and cash equivalents of $4.2 million. Working capital was $8.2 million, a decrease of approximately $4.9 million as compared to December 31, 2014. The decrease in working capital was primarily attributable to a decrease of cash and cash equivalents, increases in accounts receivable, inventory, advances to contractors and a note receivable from Milestone Medical offset by a decrease in current liabilities.

At this point, I'd like to turn the call back over to Leslie. Leslie?

Thanks, Joseph. So given all of our progress and near completion of our clinical trials, we recently formed a Global Advisory Board to aid in the commercialization of our medical instruments. The establishment of our Global Advisory Board will be an important resource as we move towards the worldwide rollout of our epidural instruments. We are pleased to report the appointment of Bob Miglani, who has been with Pfizer for 23 years, where he held various senior sales pricing reimbursement corporate affairs as well as market access roles and was responsible for managing projects and strategies in multiple countries including the US, Europe and India.

We are also pleased to announce the appointment of Dr. Chalil, a physician and executive at Boehringer Ingelheim, the world's largest privately held pharmaceutical company. Dr. Chalil is also the Chairman of Global Clinical Research and Trial Network of the American Association of Physicians of Indian origin, the second-largest physician organization in the US, second only to the AMA and has served as Scientific Advisor to AAPI for the past five years.

And lastly, I'm pleased to welcome Lidong Zhang, who brings nearly 30 years of senior pharmaceutical and healthcare experience including relevant experience in R&D, sales, senior management and other positions in both domestic and multinational pharmaceutical companies including President of China National Medicines Corporation, President of China National Pharmaceutical Logistics, and Vice President of China National Biotech Group. He also served as Chairman of National Medicines Prospect Dentech Company.

As we've mentioned on previous calls, we are also moving ahead with plans to launch additional instruments including our Botox, ophthalmic and veterinary instruments to name a few. We look forward to providing updates on other medical instruments we plan to launch in the future.

So to wrap up, our balance sheet remains solid and we are in a strong position to move forward on our growth strategy in terms of both our dental business and our new medical instruments. We are encouraged by the outlook for the business and look forward to announcing additional developments as they unfold in the months to come.

I want to thank you for joining the call today. At this point, we would like to open the call to questions. Operator?

(Operator Instructions). [Gerard McLain], private investor.

Yes, thanks for taking my question. Well I have actually a two-part question. It looks like you are hiring a lot of people so you must believe in what you're doing or you wouldn't be hiring all those people and those people would not be taking those jobs I would not think. So that seems as a good sign.

There's a lot of medicine now that's going in the injection route. I was just wondering is the handheld needle that you have, can it be made in such a way that for certain things it can be done at home by individuals? Would it be reasonable for them to buy or are they going to be necessary to get a hold of the doctor still?

And then also could a nurse do this as well as a doctor which would be more cost effective?

That's a good question, thank you Gerard. Yes, we definitely are targeting the self-injectables market. That addresses the at home injections that you are talking about and we feel that our technology is great news for it and we are looking at that. In addition, you asked another question. Help me there.

That was the point that it would be programmable in such a way that nurses rather than doctors would be able to administer this. (multiple speakers)

Yes, one of the real strengths of having the computer assistance if you will to the injection is that you can move into areas where you don't need a physician but rather you could use a nurse or a nurse anesthetist, etc. So this is one of the main advantages of using the computer technology associated with the injection function.

Well, it seems to me like you've got a winner. That's all I've got to say. I believe in it (multiple speakers) and I think you believe in it and I can see no reason -- I'm sort of handicapped, forgive how I talk. But anyhow, I can see no reason why this should not succeed unless you run out of money before you get there. So as long as you take care of the money part, I think the technology and the need for it will take care of itself. You're doing something good for mankind in what you are doing.

Thank you, Gerard. We appreciate it. Thank you.

(Operator Instructions). Anthony Vendetti, Maxim Group.

I just want to go over the timeline for the FDA approval for both the IA, the intra-articular as well as the epidural. It appears that the --

Anthony, you broke up on us. We can't hear you. Operator?

Mr. Vendetti, if you will please requeue.

Operator, did we lose them?

And he is back in the queue.

Okay, is that better? Sorry about that. So I just want go over the FDA timeline for both the intra-articular as well as the epidural. It appears that the intra-articular, everything has been submitted and that -- has the FDA come back with questions and have you submitted the final -- is the final submission done and you're just waiting for FDA feedback? And then talk about the timeline a little bit for the epidural.

Sure I can answer that. I've been working pretty closely with both the President of the Company as well as our operational people and our regulatory people. At this point, the IA, we have made the submission, we have answered a group of -- similar questions that they have asked and I believe that we are just waiting in the queue now for the final review and the final approval.

So how long does that take? I don't know. But I hope, I'm hoping that it will be relatively quickly since the first parts and the first questions were relatively simple and straightforward questions.

Okay, great.

On the -- so I think that is promising. It should be not in the distant future. On the epidural, we are working our way through, as the press release mentioned last week and as Leslie mentioned in her presentation, we are down to the last 40 -- less than 40 patients in a site in two sites in Texas, premier sites and we are hoping to get that process through. We have already completed the pain management part of the clinical which is a substantial number of people. So we are down to the last pieces of this process. And I hate to say that it's out of our control but the answer is it is out of our control and we're moving forward as aggressively as we can and we are down to the last short strokes in this process.

Okay. So you're hoping to submit that sometime in May if the trial is completed, another week to submit it. And that starts the epidural 90-day clock, up to 90 days the FDA has to respond either with questions or an outright approval is usually the way it works.

That is correct. We are close as I mentioned before but I can't accurately predict a timetable even after we make the submission because there could be some questions. But we are looking promising and as I mentioned, we've completed all of the pain management with a substantial number of patients and we are now in the final process with less than 40 patients left for the epidural for the labor and delivery process or segment of this instrument.

Okay, great. In terms of expecting a better 2016 and first quarter, is that due to an improvement in the dental business because I know you announced a deal with Milestone China for dental instruments? Until we get these approvals, it's the improvement in the dental business that will drive the growth here in the near term, correct?

Anthony, this is Joseph again. Yes, the answer is that the growth in the near term will be in the dental segment and as we noted today, Leslie in her presentation, that both areas are moving forward, one on the international base. Gian Domenico Trombetta, who is the CEO of Wand Dental, has been making major strides outside the country, South America substantially as well as in Europe and the Middle East. That business is growing and also that we are moving forward with Henry Schein through their process which we all know is the world's leader in distribution for medical and dental equipment.

Okay, great. And then lastly, Joe, I was just wondering, you filed for a two-week extension. You have now reported before the two weeks were up. What was the stumbling block to submitting the K on time?

Sure, I can answer that. Unfortunately the answer is pretty simple; the details of the process was a little bit more complicated. As you know, we have joint ventures in both medical and in our business with China and some of those transactions are much more complicated than would normally be the case for an average company.

If you take a look at our 10-K and management discussion and analysis, you will see that we had to go through quite a rigorous review of how you handle a variable interest entity and the impact both on the financial statements on the balance sheet side as well as the P&L side to do that -- make that presentation clear and complete as far as the requirements for the SEC and for the accounting regulations.

So the answer is yes. The numbers were complete, the process of disclosure and presentation was a delayed process that we are working our way through and we have completed now.

Okay, great. Perfect. Thank you.

William Pike, Pine Street Securities.

I missed the comment on cash adequacy. Could you review us on what the cash runway looks like and worst-case assumption that Schein and everyone else is slower getting the product out the door? When and how severe would the maximum cash pressure be and so forth?

That's a good question, William. The answer is at this point we ended the year at $4.2 million in cash. We are working diligently on keeping the cash flow in a positive direction both through eliminating some of our expenses, reducing expenses in certain areas but more importantly on looking at that revenue increase source both with the Chinese business, with the business that Mr. Trombetta, our CEO in Italy, is picking up additional new clients and creating increases and some of our existing distributors both in Europe and South America. And Henry Schein is an important part for us also.

So I'm not sure exactly what your question is because if I take into consideration of everything working the way it should work, we should be on a continuous cash flow basis positive going forward. However, it also includes the issue of Milestone Medical and how quickly they will get through the 510(K) clearance process.

So at this point we're not forecasting that we would have a cash deficiency or an issue of running out of cash over the next let's say next six months. So we are diligently watching that process and making sure that we are moving forward.

The key indicators as I indicated, is number one, the continual process of moving forward in dental increased volume and the collection of those receivables which has never been in question before. And then the second point is that Milestone Medical, which is our joint venture partner for the Epidural & Intra-Articular on keeping their costs down to a reasonable limit until we can receive 510(K) clearance.

Thank you.

There are currently no questions in the queue. (Operator Instructions). [John Korb], Private Investor.

I have a question about the Henry Schein distribution agreement. That's for your dental instruments, is that correct?

Yes it is for the dental instrument, the STA.

Okay, if my memory serves me correctly, this is not the first time you've had an agreement with Henry Schein for distribution and the last time it amounted to nothing. I think you ended it because they weren't doing anything but sitting on a distribution agreement. What is different this time that you hope that it might work?

This is Joseph. It's interesting that you have such a good memory of the past of a bad event. The issue with Henry Schein and the distribution agreement we have going forward with them is that heretofore they were and still continue to be the largest distributor of dental, medical and veterinary supplies in the world. However, as you pointed out, it's basically a catalog business. In the past, we used purely their catalog personnel.

With the new agreement that we are entering into, they have a group specifically of over 25 employees that sell specific instruments on an exclusive basis. So you have 25 people in the field plus management plus separate call centers that actually work through a process of only carrying a limited number of instruments, in the area of five to seven instruments. So they are a direct sales force working with their cohorts which are the normal salespeople in the field.

So good memory about the past. Unfortunately, catalog business with any large distributor without a dedicated sales force working on the instruments would give us the same result. So we have changed the format principally because Henry Schein has changed their format and realize that there are opportunities for them to differentiate themselves not only from other distributors but also within their group to take exclusive products on, to give them to an exclusive group of employees who get paid on a commission basis as well as a standard and have performance guidelines for those six supported products that they carry.

So the differentiation is a direct sales force that is working on selling our instrument on an exclusive market approach.

Is an employee of Milestone Scientific going to be involved in any of these efforts to get the dental instruments going in the United States? Wasn't that a possibility at one time that you were actually going to work with a distributor or somebody from Milestone was going to work with a distributor? You were working with dental hygienists at one time I believe to employ them on your behalf or have you abandoned that effort and going to let Henry Schein handle it completely?

No and that's again very good memory. The answer is that in the past our hygienist process works -- and it does work. In fact, Henry Schein through this group is hiring specific infield hygienists that will support these special products sold by the exclusive group. So we are going to get the best of both worlds. We are going to get a sales force that is dedicated to a group of six or eight instruments. They are going to have and they do have currently a dedicated call center at those follow up calls believe it or not with their customer base to make sure that they are in need of disposables which is again our bread-and-butter as well as having field hygienists that are out in the field training and retraining where necessary.

More importantly, we will also and we do have both myself as well as a senior manager working on the rollout and the continual process of this select group of Henry Schein people and their management group making sure that this progress with Henry Schein and this new promotional exclusive product basis is successful for both companies.

But very good memory and I hope that the future will give us a much brighter picture than we did the past. I think it will.

Okay, that's good. I have one more question regarding the dental instruments in China. I think when you first got -- I know there have been a number of delays over there -- but when this first became a possibility, Leonard was absolutely ecstatic about the possibilities in China because I think the idea was they are a lot less -- they are a lot more -- less likely to go to a dentist because they have a fear of dentists and that this was going to be a lot more readily acceptable in China than it may have been in the United States.

Do you still feel that way? Do you still feel like once it gets going there are literally open-ended possibilities in China or has your idea of the market over there changed?

We have always felt strongly about the Chinese market because it's a burgeoning market and as a direct result of that, we are not finding the resistance among the dentists that we have in the United States and other countries where the delivery of a dental injection has been done manually for such a long time and it's really considered standard of care.

So the good news is because it's a relatively new burgeoning market in China, we expect that the acceptance will be dramatically faster and we will be able to layer in this technology as the standard of care for the country.

Okay, wonderful. Well thank you so much for your efforts at Milestone and I wish Milestone the best of luck in the future.

Thank you.

Thanks, John.

[Ed Agucian], Private Investor.

In the case of your international distributors that you were speaking with regarding marketing your epidural instruments, given the fact that, A, as you have stated several times, much of the process of getting FDA approval is out of your control in terms of timing, and, B, your limited cash resources presently. Have you given any thought to trying to line up a few of those to start selling your instrument there that are willing to do something without FDA approval even though you wouldn't have as good a deal just as an effort to try to get some cash flow going?

Well, I think that's a really good question and obviously FDA approval is major. We do have CE approval in Europe and we are speaking to distributors on a regular basis and essentially putting together if you will, kind of stockpiling a list of interested distributors. FDA approval becomes critical and pivotal and please don't think that we are turning away revenue because we're not. But what we are doing is essentially -- because we've been so close now for some time, we are really working to make those deals in conjunction with the FDA approval. We are constantly out visiting, talking to and lining up potential distributors and that is the marketing strategy at present.

Okay, thanks. That's helpful. In the case of the intra-articular instrument, do I understand it right that you believe anyway there was no need to do any studies -- clinical studies for that, and that you could get it approved without any studies? Is that correct?

There were some thoughts initially that we would be able to move forward without it. As it turns out, and Joseph, you mark my words here, but as it turned out we have requests for that. Is that correct?

No, it's not and I think that we made our submission complete and I believe that we are in the process Leslie. There was some talk about that at one point but we have been able to identify the process that we have gone through and for the process that we're going through which is the first indication of the process that a study was not required so we are on the fast track to get the 510 clearance on the IA at this point without the study.

Okay, that's excellent. I do know that it was a question at one point but it sounds like we've overcome that.

It's been changing and the process is that we have completed what we need to get through and get a 510(K) on the first indication so we are just in the process. It's a matter of time at this point.

Great.

Well that's tremendous news. That's amazing that they didn't require any studies. I'm just curious, did you reference your study on the epidural and pain management or with respect to your application for the intra-articular, you didn't even mention that?

This is Joseph again. No, we referenced our prior CompuMed instrument and CompuFlo studies that we did. They appear to be significant enough and supported enough that the FDA did not require at this point an additional study.

Okay, excellent. So if you had to rank the two instruments in terms of order of getting approved for sale by the FDA, should we now be putting intra-articular on top of (inaudible) before the epidural?

The intra-articular as we mentioned before has already been cemented so once we get through the process of the review from the regulatory side, then we are ready to go forward on marketing that instrument.

All right, well that's quite a development there. Have you -- I presume you are changing your priorities with respect to the various distributors in recognition of that change in the order I presume, right?

Well it depends on the process that we are in with the FDA because they determine where we are, the number of studies that we need and as indicated, the IA for the first indication which is the injection is moving forward faster. As a result, it's not us deciding, it's the FDA giving us the indications of what they need to --

Understood. No I understand but with this very positive development on the other side of the coin, I hope that you're not leading up to get flat footed here and get an approval of an instrument that was not the first one that you were working on I guess. (multiple speakers)

We're both working on both at the same time. The question is what the process is within the FDA themselves and the indications of use that we are trying to process through.

So as I indicated, we are actively pursuing both. What I can tell you is that the IA is incomplete as far as we are concerned for the first indication and we are waiting for the FDA to give us 510(K) clearance on the IA because it's already complete from our side.

The epidural because -- additionally the research study, the clinical study we have to do we are still short less than 40 people before we could submit that for final clearance.

Listen, it's positive across both sides because we are moving down that line. Unfortunately as Leonard has mentioned in the past and as you've seen in our reports, we cannot anticipate exact timelines or processes that the FDA will go through in completing their review. But I can assure you and other investors that we are moving judiciously and moving expeditiously on trying to get these both of these 510(K) clearances approved.

Excellent, thanks, Joe. Can I move over to so I can get -- withdraw your efforts to do a capital raise in tone with Milestone Medical. What are your thoughts at this point regarding them? Do you think you might try it again over there at some point or use some other means for them to raise the capital they need?

Leslie, should I answer that?

Please.

Okay, so the answer is yes, [home] has been a good market for us to raise capital. However as you can see in the impact on exchange rate as well as the government itself, it has become very difficult to go through and raise additional funds and as a result, we are interested but it does not appear that it's going to be an immediate opportunity for us to raise additional capital in Poland. So we will have to take that into consideration and determine what our other needs are and other opportunities throughout the world, including the United States.

Okay. Last question is I think I saw somewhere in the 10-K that you've contributed some additional instruments to Milestone China but I thought it was a contribution to their capital which I would have thus expected to increase your percentage ownership. But I see the percentage ownership hasn't gone up. So maybe you could help me understand what that transaction is?

Sure. I can do that again. We contributed an equal percentage of capital increase to Milestone China. Ours was in instruments which was 308 instruments. Those instruments still gave us a 40% ownership in Milestone China and the other 60% owners put cash in to keep their equivalent share. So at the end of the transaction, everyone increased the same amount to stay in proportion so our ownership before and after is still 40% in that company.

Okay, very good. That answers that. Thank you very much.

Our pleasure.

Thank you.

(Operator Instructions). There are currently no questions in the queue.

Okay, well, again, I'd like to take the opportunity to thank you all for being on the call this morning. We will be talking to you again soon in terms of our first-quarter results. And have a good day.

This concludes today's call. Thank you for your participation.