Zomedica Corp.

Good afternoon, ladies and gentlemen, and welcome to the Zamedica Q3 2024 Financial Results Conference call. As of time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, November 7th of 2024. I would now like to turn the conference over to Mike Valley. Please go ahead.

Thank you, Rob, and good afternoon, ladies and gentlemen. Welcome to Zamedica Q3 2024 Earnings and Results and Business Update call. Joining me on today's call are Zamedica's Chief Executive Officer Larry Heaton and its Vice President and Corporate Controller Mike Zelke. Before we begin, we would like to remind everyone that on this call, we will be making various remarks about future expectations, plans, and prospects that constitute forward-looking statements. These forward-looking statements are based on assumptions, and there are risks that results may differ materially from those statements. As such, Zamedica cannot guarantee that any forward-looking statements will materialize, and you are cautioned not to place undue reliance on them. We refer current and potential investors to the forward-looking information and risk factor sections of our public filings available on CEDAR Plus at .cedarplus.ca and on edgaratcc.gov. Forward-looking statements made on this conference call represent Zamedica's expectations as of today, November 7, 2024. I will now pass the call over to Zamedica's Chief Executive Officer Larry Heaton. Larry? Thanks,

Mike. I'd like to start by thanking our shareholders for your support, wishing prospective investors, analysts, and others a good afternoon, and welcome all to the Zamedica Q3 Earnings, Results, and Business Update call. I'll start by providing an update on our recent operational performance, followed by a financial update from Mike Zelke, our Vice President of Finance and Corporate Controller, before opening the line for questions. Earlier today, Zamedica released its financial results for the third quarter of 2024. The third quarter was strong for Zamedica. We delivered double-digit top-line growth, executed on a variety of growth initiatives, posted solid gross margins, reduced our operating expenses, and stabilized our operating cash burn. Revenue set a new record for the third quarter at $7 million, reflecting over 10% growth over the third quarter of 2023, driven by -over-year growth in both our therapeutic devices and diagnostics segments. This marks the 14th quarter in a row that revenue set new quarterly highs, a trend that we expect to continue. Total therapeutic device revenue increased .5% -over-year due to solid pulse-fed performance, which increased 24% over the prior year quarter, as our capital sales team returned to normalcy. As we discussed on last quarter's call, we experienced some disruption in the U.S. in the second quarter as a result of short-term productivity headwinds associated with multiple of our sales representatives being out unexpectedly on medical leave. Moving into the third quarter, our sales force was back to full strength, and as expected, we saw a rebound in new system sales and installations. We also noted macroeconomic factors that potentially impacted new system purchases during the second quarter of this year, primarily related to interest rate concerns. Although we noted these concerns abating somewhat as rates declined a bit and stabilized, we still deployed additional placement and pricing models to provide greater access to veterinarians looking to better serve their pet patients. This resulted in multiple customers acquiring a new pulse-fed system using one of our flexible models, which highlights the demand for the technology and adds a differentiated revenue stream outside of a typical capital purchase. We believe there is a high likelihood that most of these placements will result in a capital purchase in the future, as these customers realize the value of offering shockwave therapy from pulse-fed within their practices. In short, we continue to be encouraged by the demand for the pulse-fed system amongst both new and existing customers, and note that our current penetration of the small animal U.S. market is minimal at this point, leaving substantial upside for this product line in the U.S. and abroad. Our diagnostics segment had another strong quarter, with our revenue growing 38 percent year over year. This was largely driven by 80 percent growth from the Truforma platform, as we are seeing solid utilization trends with our legacy assays, as well as encouraging adoption trends with our recently launched assays, including CPL and Equine EACTH. Outside of the strong revenue performance during the quarter, we also made noteworthy progress towards a number of our key initiatives to drive growth in 2024 and beyond, to ultimately reach cash flow and gap profitability. Let's begin with our focus on commercial expansion efforts. One of the significant commercial expansion opportunities is in international markets. Supporting the broader availability of our portfolio globally is the extensive work we've done this year to make our products available on a global scale. We now have CE marking on all Zometika products, so we are able to freely sell into markets in the EU, as well as other countries that accept the CE mark. To take advantage of this opportunity, we expanded our global reach through the execution of multiple strategic partnerships with leading distributors in new international markets. In July, we partnered with Leader Healthcare Group to be a distributor of our entire product portfolio, to both small animal and equine, and actually also camel veterinarians in the Middle East, Egypt, and India. In August, we partnered with Sire Veterinario to be the exclusive distributor to veterinarians in Costa Rica, to expand our reach within Central America. During the current quarter, we announced the expansion of our partnership with GroVet, who has been effectively selling the Equine PulseVet system in many countries in Europe. In addition to expanding their coverage to all of the EU and the UK, totaling 30 countries in all, GroVet will be the first international distributor of our Truforma Equine product platform, including Equine EACTH, Equine Cortisol, and soon Equine Insulin and Equine Progesterone in this region. In addition, we are currently in the process of acquiring the necessary approvals to launch our Truforma, TruView, and BedGuardian diagnostic products in Japan in 2025. These will join the Equine PulseVet systems already on the market in Japan, and will be directed at the 12,600 companion animal veterinary practices in that country. With new distributor partnerships in place and broad global regulatory approvals, we have significantly expanded our reach outside of the U.S., which provides Zomatica with increased opportunities for growth on a global basis. Now, I should note that in each country that we introduce Zomatica products, multiple steps are required to generate meaningful revenue, including execution of the distribution agreement, training of the sales and marketing staff, launching the product, engaging key opinion leaders, and developing the market, all leading to a ramp in sales

over

time. As we're actively engaged in this process in several new countries, we continue to expect the international business to be an incremental contributor to performance during the balance of the year, and be a material growth driver for Zomatica in 2025 and beyond. In addition, these commercial opportunities provide leverage to our existing operating expenses. Because we sell into international markets primarily through distributors, which cover their fall overhead expenses for sales and marketing, we're able to enjoy increased revenue without significantly increasing our operating expenses. We

also achieved

a number of significant milestones within our product portfolio. Turning to the PulseVet line, PulseVet continues to be our leading product, and we have made significant progress in growing its adoption across our customer base, including both equine and small animal veterinarians. As we announced during the quarter, we continue to be the official shockwave therapy of a number of equine associations, including the American Quarter Horse Association, the National Cutting Horse Association, the U.S. Eventing Association, and U.S. Equestrian, which fielded the USA team at the Olympics this past summer. I'd also like to give a shout out to veterinarian Dr. Pam Nichols, past president of the American Animal Hospital Association, and a member of Zomatica's board of directors, who just last weekend won the world championship in level 2 amateur cutting at the AQHA world championship show in Oklahoma. Congratulations, Dr. Nichols. To support PulseVet's adoption beyond its existing, historic installed base, we continue to focus on developing clinical data across a variety of indications for use, including its potential to treat respiratory conditions in horses and perhaps dogs, improve equine hoof health, and forestall osteoarthritis in small animals, paving the way for new sales opportunities beyond the technology's historic applications and customer base. With respect to our ACC platform, our ACC Loop products received a renewal of its fear-free status during the quarter, a designation important to pet parents concerned about their pet's anxiety levels, especially following an injury or surgery, which is when the ACC Loop is most beneficial. Our ACC sales were relatively constant quarter over quarter in line with historic seasonality, but lower than the third quarter a year ago due to a substantial one-time initial stocking order from a new online distributor that we received in the third quarter of last year. The Loop business gets busy around the holidays in the fourth quarter, so we expect a strong finish for the year in this product line. Turning now to an update on the TrueView digital microscope and pathology platform. During the quarter, we continued our activity to add artificial intelligence or AI interpretations to the TrueView system. When this is complete, each hematology slide processed will be accompanied by an AI-generated diagnostic report. We're currently field testing the AI functionality and getting ready to deploy the system later this year with a full launch in the new year. Beyond the development of our AI capabilities, we continue to expand the functionality of the TrueView system. During the quarter, as part of internal R&D efforts, we introduced hardware enhancements, resulting in dramatic improvements in the speed of imaging, which will further bolster the value we're able to deliver to customers moving forward. We also finalized and rolled out a new protocol, specifically for ear cytology. This innovative feature streamlines the slide preparation and scanning of ear cytology cases, allowing veterinary professionals to diagnose and treat companion animals faster and more efficiently. We believe this will be a highly impactful protocol because ear cytology is performed daily at vet clinics. As otitis, a common ear condition affects between 10 to 20 percent of dogs and 2 to 6 percent of cats. The effect of the various enhancements to both hardware and software of the TrueView system is to allow it to lay claim to being the fastest digital microscope available, the digital microscope with the highest quality image, and the only digital microscope that automatically prepares the slides, and soon also

able

to

offer AI-generated diagnostic reports.

Turning to the Trueforma platform, we continue to be encouraged by the growing adoption of Trueforma platform as we are seeing continuous increases in our installed base. Importantly, we're seeing expansion into equine veterinary practices as we launched equine assays over the past year to benefit from our growing portfolio penetration across both small animal and equine practices. We continue to focus on accelerating the development and commercialization of new assays, both for small animals and horses. In addition to the assays launched earlier this year, we're preparing to launch several new assays during the fourth quarter, including equine insulin, which is needed as a standalone assay for diagnosing insulin dysregulation and is frequently used in conjunction with our EACTH assay with diagnosing PPID, which affects more than 21 percent of horses over 15 years old. The second is equine progesterone, which is used to monitor progesterone levels in equine breeding, for which there are over 25,000 attempts annually in the U.S. And this assay will be a complement to our recently launched equine cortisol assay for foals. Third is the canine progesterone assay, which is used to identify optimal breeding times for dogs, which currently produces over 4 million puppies per year in the U.S. And finally, canine pro-BNP, which is a screen for heart disease used by breeders, concerned due to the fact that around 10 percent of dogs will develop heart disease in their lifetime. We have a robust effort to launch these assays and develop new high-volume assays in 2025 as we look forward to the continued ramp of this fast-growing product line. Turning now to an update on the VetGuardian platform. The sale of new VetGuardian systems continue to highlight the value of the technology and the benefits our customers are seeing. We're constantly seeking ways to make the VetGuardian even better for customers and their pet patients. In August, we launched advanced audio capabilities for the platform, which include cutting-edge features like real-time audio streaming, recorded playback functionality, and customizable alerts, empowering veterinarians with unparalleled insights into animal health through monitoring data. These sophisticated tools build on the existing features of VetGuardian and further enable veterinarians to detect subtle nuances in animal behavior and health, facilitating enhanced monitoring and giving veterinarians peace of mind when pet patients are at their most vulnerable in post-surgery, in the ICU, and alone in the clinic overnight. During the quarter, we also expanded the capability of our Mysomatica portal to be able to accommodate more than the previous eight VetGuardian monitors at one time on one screen. This was launched as we had a customer request to buy 10 additional VetGuardian monitors to add to the one that they initially purchased. While still early in the launch cycle for our VetGuardian system, we're pleased with its adoption in the small animal market and expect a strong finish for the year and significant growth in 2025 and beyond. We also remain excited about bringing VetGuardian into the equine market. We delayed development just a bit this year so we could incorporate the various enhancements we've made into the small animal system before customizing it for equine use. We're now planning to develop and launch the equine version in 2025, which we believe will be very well received by the equine veterinary community and set the stage for potential expansion of the market opportunity to horse

trainers, breeders, and owners. Now turning to an operational update. As noted on

our last earnings call, we installed a new automated robotic manufacturing line in our Minnesota manufacturing facility that automates steps that previously required high levels of manual labor. After validation, this new production line is now live and manufacturing most of our Truforma assays. We expect to move the remaining assays onto this line during the current quarter and continue to believe that this new line will drive efficiencies, which allow us to realize cost benefits to further improve our gross margins in the future. This is important because as we work towards cash flow break even and gap profitability, maintaining and growing our gross margins is a critical contributor. Leveraging our expense structure by growing revenue faster than expenses is also critical. In the third quarter, aside from non-cash impairment charges recorded in the second quarter, we reduced operating expenses by over $900,000 versus the previous quarter. Over the last three years, we've invested in infrastructure and we're now beginning to see the impact of our ability to increase operating leverage through scale. As we continue to generate high margins and reduce operating expenses as a percentage of revenue, we're moving closer to our goal of profitability. Before turning to a financial overview, I want to provide an update on our CFO search. The process to identify a new CFO is currently ongoing and we're pleased to see the quality of candidates we're engaging with and we'll let you know when we've completed the search. In the meantime, Mike has been doing a very nice job on the financial side of things here at Zomatica. So with that, I'd like to turn the phone over to

our vice president finance and corporate controller, Mike Zeltke. Mike?

Thanks, Larry. Unless otherwise noted, all financial results highlighted will be for the third quarter of 2024 and compared to the third quarter of 2023. Total revenue for the quarter was $7 million, an increase of .2% driven by growth in both our diagnostics and therapeutic device segments. Capital revenues were $2.2 million, an increase of over 21%, primarily due to continued execution of our PulseVet commercial strategy. In the third quarter, consumable revenue was $4.8 million, an increase of approximately 6% despite a significant distributor initial stocking order for a CC, consumables that took place during the third quarter of last year, which did not reoccur in the third quarter of 2024. Excluding the CC products, consumable revenue grew 27% over the prior year quarter. Consumable revenue represented 68% of total revenue in this quarter. Therapeutic devices segment revenues from PulseVet and the CC products were $6.5 million, up 8.5%, primarily driven by the strength of PulseVet, which was up .5% or $1.1 million. The strong performance of PulseVet within therapeutic devices was offset by the aforementioned large CC distributor order that occurred during the third quarter of 2023, which again did not reoccur in 2024. Third quarter diagnostics segment revenues were approximately $500,000 or an increase of 38%. This was driven primarily by growth within the Trueforma product platform, resulting from our expanded catalog of assays. We have launched four assays since the second quarter of 2023, including three that have been launched subsequent to our acquisition of Coral Biotechnologies in the early fourth quarter of 2023. This is worth noting as an increased ability to develop and launch additional assays was a key driver of our acquisition. Within the diagnostics segment, capital revenue was slightly down by 6%, while consumable revenue, primarily driven by the margin, was a strong 72.3%, which is slightly better than the high end of our previously stated target range of 65 to 70% and higher than last year's 69%. In the quarter, total operating expenses were $12.5 million, an increase of 21% over the prior year. Importantly, as Larry also noted in his remarks, when compared to the second quarter of 2024, operating expenses were $900,000 or 7% lower, primarily as a result of reduced non-recurring professional fees. In the quarter, research and development expenses were $1.8 million, driven by labor and supplies consumptions as we advance new assay development. Sales and marketing spend was $3.9 million compared to $3.3 million during the same period of 2023. Primarily due to people and salary related expenses as we reached full staffing within our sales force. General and administrative expenses were $6.8 million compared to $6.1 million during the prior year, with most of that increase resulting from non-recurring professional fees. Net loss for the quarter was $6.7 million or 0.007 cents per share, compared to a net loss of $491,000 or 0.0005 cents per share in the prior year, which included a one-time gain of approximately $2.2 million related to our acquisition of structured monitoring products or SMB. Non-GAP EBITDA loss, which includes adjustments for stock compensation for the three months ended September 30, 2024, was $4.8 million compared to a loss of $0.3 million for the three months ended September 30, 2023, which again included the previously referenced one-time gain. When adjusting for non-cash and non-recurring items, our adjusted non-GAP EBITDA loss was approximately $4.3 million. Turning to the balance sheet. So, Medica ended the third quarter with $77.8 million in cash, cash equivalents, and available for sale securities. Cash used in the quarter was approximately $5.1 million and included $1.1 million of non-recurring items, with the remaining $4 million used for operating expenses. Quickly, I'd like to highlight our declining use of cash in 2024 to date. Our total use of cash by quarter so far this year has been $9.6 million, $7.9 million, and $5.1 million. While our adjusted operating cash burn by quarter has been $6.9 million, $5.2 million, and $4 million respectively, reflecting positive trends in operating efficiency and revenue growth. As a reminder, we carry zero debt. We have nearly $78 million in liquidity and feel we are well funded to capitalize on our opportunities for both organic growth and growth through potential acquisition. With that, I'd like to hand the call back to Larry for closing remarks.

Larry? Thanks, Mike. As you've heard, we have a lot going on.

Five highly differentiated, unique, continuously improving product lines and active commercialization by a fully staffed, professionally led sales force. Growing product adoption in the United States fueled by tremendous marketing activities. Substantial opportunities to grow our international revenues with newly authorized products. Very strong gross margins generated by efficiently manufacturing our own products. And substantial opportunities to leverage the infrastructure we have invested in to bring expenses down as a percentage of revenue. In summary, we're incredibly excited about the future of your company. Supported by the strength of our balance sheet and driven by the wide variety of growth initiatives we're executing, we're positioned to deliver a strong revenue trajectory while setting ourselves up to achieve positive cash flow and gap profitability. Before opening the line for Q&A, I wanted to thank our employees for their dedication and thank our customers who support our mission to help veterinarians provide the best care possible to our pets and yours around the world. With that, I'd be happy to open the line for questions, operator.

Thank you. I would like to remind everyone in order to ask the question, please press star followed by the number one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star once to ask the question and we'll pause for just a moment to allow everyone to signal for questions. Our first question comes from the line of Robert LeBoyer from Noble Capital Markets. Your line is open.

Good afternoon and congratulations on a nice quarter. You had mentioned that some of the products had recovered due to the sales force coming back to full strength. And I was wondering how the remaining quarter of the year looks and what the outlook for growth in 2025 is, as best you can tell at this point.

Sure. So, thank you for the question, Robert.

So,

the products

that were primarily affected in the second quarter, we had five salespeople that really unexpectedly went out on medical leave. A couple different conditions won't go into the details, but that really put us at a, you know, kind of behind the eight ball when it came to selling new capital products, right? So, PulseFed, new system installations, BedGuardia, new system installations, new Trueforma installations. Of course, our consumable business remained strong during the second quarter, while PulseFed capital was, you know, down, actually. Our consumable PulseFed business was up in that quarter by 11%. But it's where in those conditions or in those situations where the reps need to be actively pursuing the capital sale, we were at a disadvantage in the second quarter. Those folks came back. And actually, by the time we had the call last quarter, they were pretty much back in place. During the course of the quarter, a couple of them, unfortunately, had to return to medical leave and won't be going back to work anywhere, sadly. But having said that, we had plans in place that we implemented to make sure that we had backup. And so, in the third quarter, we saw really a nice rebound in capital sales. PulseFed sales, I mentioned earlier, were up, you know, capital sales were up like 24%. So, we're really pleased with that. And we expect that to continue in the fourth quarter and beyond. Now, as we look into 2025, we do have some plans to increase our sales presence. We have a couple of positions that we're creating for the new year that will focus on corporate accounts, being able to sell to many accounts at one time, and also some positions that will focus on capital sales specifically. And so, we're in the process during the fourth quarter of backfilling the people who are being promoted and filling a couple of slots. Having said that, then we expect growth to accelerate in 2025 beyond what we saw in 2024. And we expect once we get the new CFO on board that we'll reinitiate providing guidance, and we expect to do that in the new year.

Okay. So, is there any ballpark figures that you can give for revenue growth or any expectations pending the arrival of the new CFO? So,

I would tell you that we're highly confident on being able to increase revenues across all of our product segments, both diagnostics and therapeutics. As I mentioned earlier, this is the 14th quarter in a row where each quarter we set a new record revenue level. And so, you can expect that that would be the case as we move into 2025. And then in addition, as I mentioned, we have the ability to further accelerate revenue growth in our international markets. Beyond that, I prefer to wait until we're able to provide you credible guidance, which we'll do

in the new year.

Okay. Yeah, that's fine. And if I could just ask the question about the expenses, cost of goods sold was relatively low as a percentage of sales. And some of your other numbers for GNA and SGNA were also proportionately lower. Are those trends that one can expect going forward or were these one-time gains any guidance on that side?

So, with respect to gross margins and

cost of goods sold, we expect that we'll continue to have to generate margins. I think we had previously provided a range of 65 to 70 percent. Earlier in the year, we were toward the lower end of that range. Of course, the last two quarters have been above that range. We continue to expect, as we think about our business going forward, we continue to expect revenue or margins to be around 70 percent. But we would continue with that range. So, yes, we expect that trend to continue. And then with respect to our overall operating expenses, as Mike mentioned, we were able to reduce, I think I mentioned it too, we were able to reduce OPEX from third quarter to second. There were some one-off things in that area. But basically what you're seeing is, well, maybe not all, but the preponderance of those one-time items, those non-recurring items, they're pretty much behind us. We've spent three years now building the company, building the infrastructure, putting the team in place so that we can really improve efficiencies and so on. And so we expect whether the absolute number goes down in a particular category, it depends on the category and the quarter and what's happening during that quarter. But I will tell you that we absolutely expect that percentage, that operating expenses in each category as a percentage of

the total. Thank you very much. That's very helpful. Thank you, Robert. Operator, are there other questions from the phone line? No question at this time. Please continue.

I see one from on the phone line from William Carroll. Is that somebody we should call on?

Yes. William Carroll, your line is open.

Yeah, so a couple of questions. As you increase revenue, increase your or de- well, I can't say decrease your losses, but can you give us any timeframe, 2027, 2028, where the bleeding stops and at least your cash flow break even?

So we expect as we've indicated before.

Yeah, so I mean, I realize that you don't have a CFO to do these analytics, but what, is there a gut feel of when the company is cash flow break even?

Yeah, so we continue

to expect that we will be cash flow positive once we hit 50 million in annualized

revenue. And we, we are,

you know, everything in our planning and in our execution is geared towards getting to that level. I will note that at 25 million in sales, which is what we produced last year, that's about 1% penetration of the total available market for our products in the U.S. And so, you know, I could say it's 50 million dollars in annualized revenue. I could say it is 2% of our addressable market penetration. As to exactly when we'll get into to that level, I'll again defer to providing guidance, but I would, you know, what we had said before is that we would be there by 2026. I think that that's an aggressive goal, but one that we're certainly, we're certainly shooting to achieve.

Okay, now with the stock at 12 cents a share, is there any consideration to doing some kind of a nominal buyback?

At this point, we continue to believe

that a stock buyback would not be in the best interest of all of our shareholders, rather using the capital that we have to be able to provide opportunities for fueling organic growth and or potentially making additional acquisitions to bring additional products, revenue on board. You know, we early on in the over the last three years, early on in that period of time, we focused our M&A activities on a variety of things, including acquiring the infrastructure that we needed to build a company. As we look forward to M&A, we're really limiting our view on those things that we would acquire to those things that would be accretive to earnings that have current revenue and have decent margins so that we can accelerate the attainment of cash flow break even and gap profitability. So to utilize the cash that we have for buyback might benefit some shareholders for a short period of time, but the data shows that it's not long lasting. As somebody mentioned, it's a short term gain in share price trading off a permanent loss of the capital. So

we would prefer not to go that route. Okay.

Now, what about the risk of being delisted at this price?

There is a risk once we fell below 20 cents on a 30 day moving average, we are subject to potential delisting. As we've said on previous calls when we spoke to the exchange following the failure of the reverse split, we spoke to the exchange and let them know that we had not accomplished the increase in the share price through that activity. But let them know that we wanted to remain listed. We shared with them our plan to continue to grow the company organically. We shared our large amount of liquidity or cash that we had. And I think they viewed us as a real company, not to say that there are not real companies on our exchange, but they viewed us as a credible company and they let us know that we would continue to stay listed. They did tell us that it's their call, right? If the stock fell to a precipitously low level, then they can step in. But we don't anticipate

that happening, but it is a potential. It is a possibility.

Sure. Yeah, then now the last question. So let's say we go down the road here a few years and you've burned through enough cash. What would be your sources of potential funding? Would you guys look at debt or issuing more stock or is my question just totally premature?

Well, first, I do think the question is really

hypothetical, right? Because we believe we've got with 78 million dollars in liquidity, meaning cash available for sale securities and things like that, that we don't have any need to raise money to fund the company or to fuel operations. We believe, as you heard from Mike, are not only our operating burn, but also our total use of cash has declined each quarter this year. We expect that. By keeping an eye by continuing to be very efficient and what we do and being mindful of our cash expenditures that we have. Substantially more capital than we need to be able to fund the company through cash flow, break even and profitability, not only to fund the company for for that purpose, but also to provide cash for any additional acquisitions that would be a creative to earnings. Having said that, we do not have debt. It's not unreasonable for a company to to to leverage its balance sheet with some debt. So that would be our preference is it would not be dilutive to shareholders. But I'll go back to the way I answered at the beginning. You know, we're not contemplating any need any requirement to raise cash to operate the company and to achieve our goals.

Okay, no, very good. Thank you. Appreciate the honest answers. Thank you. Right.

You're welcome. Okay, so let's let's turn to a couple of questions from

the web. Let's see. The first one is, can you comment on the. Salesforce disruption from last quarter. Okay, so it's noted, you know, we're back up to full strength. I think I talked a little bit about that. And, you know, when we, we talk about how we've addressed those issues, I mean, in the third quarter, we saw pulse that capital sales go up 24%. Interestingly, we also saw trode sales are the consumable sales go up 24% as well. We expect that to continue. The only other thing I would mention is, well, we didn't factor it into our calculus. The election may also have given pause to some customers. We got we got one of our sales reps who did not get a sale. One of the sales he did not get in the third quarter. Yeah, the third quarter told the sales manager that the that the veterinarian wanted to wait till after the election. And you always take that with kind of a grain of salt, right? It's maybe that's exactly right. Or maybe they were just, you know, putting them off. But 9 o'clock yesterday morning that that called with the order. So, it, to the extent that had any impact, we should see a positive uplift from that as well.

All right, let's take another one from the web.

Has the interest rate environment had an adverse impact on capital sales? I think it probably has. We haven't seen it. If it had, it was minimal in the third quarter. Certainly we saw really good traction in capital sales, not only there and for Pulsefit, but also for FedGuardian. And as I mentioned, we put into place programs that would give flexibility to the to the customer in the event that they were reluctant for whatever reason. Election, interest rate, whatever it was a way for them to acquire the Pulsefit system without a capital commitment. It did basically increase their consumable price from just to give you the perspective from $40 per therapy session to $100. So, you know, maybe two and a half times, which is obviously good for our margins, but doesn't carry with it a capital sale. So, while we have that program in place, we think most of our customers will continue to want to buy them. We'll reserve that program for those that have an issue with committing capital for whatever reason. So, we don't really see any issues with interest rate and whatnot. And we know that, I mean, just today they came down again. So if that was a factor, we expect that to diminish. All right, let's take another one here. How do you see international performance from the third quarter? And what are your expectations for fourth quarter? That's a good one, because it's an area of focus for us. International sales remain around 15 to 20% of our total revenue. I think in the third quarter, they amounted to about 18% of it. It continues to be a growth area for the company. We were performing well this year. Sales outside of North America grew just under 12% in the third quarter versus a year ago versus overall sales for the company overall at 10%. So, it's growing a little bit faster, at least in the third quarter. Year to date sales outside of North America are up 21%. Almost 21 and a half percent versus the first three quarters of last year. So we're pleased with the progress that we've made and we really haven't seen the benefits of the new distributors yet. As I mentioned earlier, there's a process that you follow. We expect that to be accelerating in 2025. We've got the regulatory approvals. We've got the distributor agreements and so we'll continue to see, I think, this level of growth, maybe a little bit more in the fourth quarter. But in 2025, we expect to see substantial growth as we move forward.

Okay, let's see what we got here on the web.

You have sales, you have seven sales positions currently open. How many of these were turnover and how many are a new territory or role? So we have, let's see, one, two, three, four,

no, let's see, one, two, three. We have

three, four, five territories that are open as people move into new roles, which I touched on earlier. We have a couple of people that unfortunately had to retire for medical reasons. And that pretty much accounts for all of those. So that's the answer to the question. I think that the, obviously, the new positions that we're adding in sales, we expect to have a nice return on those investments as we move forward. Let's see, so next one, we're starting to get low on cash. What are the plans to turn this company profitable and slow down spending? I think we talked a little bit about that. First of all, we're lower on cash than we were before. I would not characterize where we are as low on cash by any means. But having said that, reducing expenses is a function of, as a percentage of revenue, is a function of both increasing revenue, which is straightforward, but also it's on not having as many of the one-time, things that we have to spend money on. We did a number of acquisitions over the last three years. That is why we have the product lines that we do. In particular, the acquisition of Corvo Biotech, just a year ago, actually, October of last year, that had an impact in terms of raising expense. And it's taken us during the course of the year to be able to bring some of those expenses down. But we expect that to be improving as we move forward. So, we'll continue to invest in driving organic growth. The idea here is not to be a profitable company at $50 million in revenue. It's to be a profitable company at an annual run rate of $50 million on our way to $100 million. And so, you need to have the infrastructure to do it. We have it now. We expect to provide operating leverage as we move forward. Will assays be available for humans in the future? Insulin? When we acquired Corvo Biotech, they also had a human side of the business, a human health side of the business. We've preserved all of that technology, all of the clinical data, the FDA regulatory studies, and so on and so forth. And we expect to be able in the future to see if that's monetizable by someone that wants to enter the human market with this revolutionary, really innovative technology for doing rapid diagnostics at the point of care. Having said that, we do not intend to commercialize the product in the human market ourselves. And our expectation is that first, we build a nice track record of this being used at veterinary health. And then we would try and capitalize on the opportunity in the human market. What are the margins headed toward with the new technology products? I think we sort of covered that. We've got not all of our products carry the same gross margin percentage, as you might imagine. The consumables have very, very, very attractive margins. The capital a little bit less so. But we think that overall will continue to be in that 65 to 70% range. And I think actually, I think pretty close to 70 on either side of it, as you've seen this year. No question, but a thank you to those of the executive staff purchasing shares of SoMedica. Well, first of all, you're welcome. Several of the company executives and members of the board of directors have acquired shares. I myself, I won't speak for anyone else as to why they did it. I myself, I think I shared this a while ago. I've got at the time, my first bought shares, I had a grandchild or two, and then I bought another hundred. And now I'm sitting at with four grandchildren. But I just heard the other day that one of my daughters in law is pregnant. So my expectation would be my intent is to give them each a hundred thousand shares. And so you'll know why I'm doing it as we move forward. I have tremendous confidence in SoMedica and our prospects and people have different reasons for buying or selling shares. That's my reason. And I think. I think, well, thank you for the comment. Let's see here. What else here? What are the new products SoMedica has that have not been released to the public? So, we've got, as I mentioned earlier, we've got four new assays we'll be launching here shortly. In fact, Equine Insulin we expect to actually launch next week and start shipping a week from Monday. And that's really good because now is the seasonal time when horses get tested for PPID and there's a big Equine trade show that we attend in early November. And so that'll come out plus the other assays that I mentioned. We have the Equine version of that Guardian, which we expect to launch next year. And, you know, the other, I really can't answer the other question. But we'll let you know that we will certainly answer it in terms of new products as we launch them. We make public announcements of those. I will say that we have products under consideration now. But it wouldn't be right to kind of speculate on those at this point, other than we're confident that we'll continue to expand the product line as we move forward. Let's see. There are questions, multiple questions on potential delisting. I think I've covered that. Will we have more locations in customer service and customer service in the United States? You know, location wise, I think we're good. We have the manufacturing facility in Georgia where we manufacture all of our electromechanical products. And that we recently expanded. So, our Chief Operating Officer Tony Blair tells me that we can sell, we can produce and distribute five times our current level, or at least our 2023 level of sales from that facility without any future expansion or any additional equipment needed. So, pretty happy about that. Don't need more there. The facility in Minnesota that we acquired with Corvo Biotech with the robotic automated line, we can produce, I think it's a million cartridges a year. So, it'll be a few years anyway before, and that's not literal, but it'll be many years or several years before we need the next million units on a single ship. So, it'll be a little bit before we have to manufacture more than two million. The headquarters here in Ann Arbor is modest, but it doesn't need to be bigger. So, we actually have plans to actually reduce our Ann Arbor facility expenses and we'll provide that information in the future as that comes to pass. So, that would

be the answer on that. We'll, let me see what else we have here.

How

much money has been expended on trade

shows? I'd have to look that up in terms of what that is, but I will tell you that we get a tremendous return on the investment from the trade show expenses that we make. You know, in the veterinary market, veterinarians attend trade shows as a way to get required continuing education credits. They attend them with their checkbooks to basically shop at these areas and to see new technology and to see new products. Our marketing team has put together a very nice program of key opinion leaders speaking at the podium at these conferences where they're introducing the Zomatica products and how they're used for particular disease states. After every one of these presentations, people from that conference or from that presentation make their way to our booth with an interest in acquiring the technology. And so, trade shows we see are a tremendous way. We have a field sales force of 35 sales reps that can see a number of veterinarians every day. But when we take two or three sales reps to a trade show, we're able to see hundreds of veterinarians every day and then the field reps can follow up on them. So, I'm not giving you an absolute number, but I will tell you that the money is very, very, very well, well spent. I think I mentioned that we're doing a little bit of expansion and we're promoting a few people

there. See what else we got.

Number of questions on delisting and compliance and I think I answered that. We've had no indication that as long as we stay at our current levels of compliance, we're not going to be able to do that. So, I think it's a good thing that we're doing a little bit of expansion and we're promoting a stock price that there will be any reason for us to expect to be delisted. On the other hand, we serve or we're listed at the pleasure of the exchange, so I can't speak for them. I can only relate what our experience has been up until this point. What do you say to shareholders to ease their minds that are thinking of selling their shares and cutting their losses? I would say that the decision on whether to sell shares in a company are uniquely personal and depends on a number of factors that have to do with that particular individual. And so I really can't comment on if they need to sell it to acquire the cash or there's some huge benefit from taking a loss and then they wait 30 days and then they buy it back or whatever. That all has to do with their own individual situations. In my situation, I'm holding these shares and this is, by the fact, I also have a boatload of options. But I think that for me, staying long in this stock is a really good move because I have tremendous confidence as do members of our board of directors, our senior management team and all the employees that are here at Zometica. Who are going out every day and introducing this new technology to veterinarians to help veterinarians take better care of your pets, our pets and everyone's pets. So I think, you know, hold it. On the other hand, again, I can't advise any individual person because I don't know their particular

situation. Let's see. So a lot of people have to have some questions about the. About the delisting, so I mentioned that.

What is it taking so long to hire a new

CFO? Not actually taking so long. We have a number of candidates that we're talking to. We're not in any particular hurry. Mike Zelke, who you heard from earlier, has been doing a very nice job. The same job that he did when Peter was here. I think that it's not so much the time it takes to bring a new CF on board, but to make sure we get one that understands the situation that Zometica is in. With respect to its share price with respect to its shareholders and with respect to the opportunities. So we'll take the. We'll take the time that we need to get the right person for the position and we're not at all concerned or alarmed. If we were, frankly, it's relatively common for a company like ours to bring in an interim CFO. If the CFO departs until you get your permanent full time CFO in our case. We didn't have any issues with our accounting or our finance team, and so we're super confident in Mike holding the reins until we bring in a new CFO. You said before you would be profitable by late 2025. I have the recording. Why has it changed 2026? Well, we previously said that we would. We would see our 1st month or quarter of profitability. We would see the 1st month or quarter of a 50Million dollar annualized run rate by the end of 25. And that has proven to be a bit aggressive as you know, for whatever reason, the entire animal health market has slowed down in 2024. And those factors that affect all of the other animal health companies, including the largest ones certainly affect Zobatica as well in the 2nd quarter. We did not have the kind of growth that we expected. And so rather than continue to say, well, no, we still have a shot at it in 2025. I'd rather be realistic, transparent and provide you with a credible answer. So it's nothing in particular. It was aggressive to get there by the end of 2025. So it's just a matter of conservatism on our part to be able to give you the answer, even if it's not the same exact answer that we gave you a year ago. It's an honest answer. Let's see what else. Here's somebody that would like my email. Happy to give it to you. I will. In fact, I'll give it to all of you. It's lhaton. And if you have a particular question that you'd like to have me answer, or just want to set up a time to talk, happy to do it. We'll not share any material, nonpublic information with anyone. Whether it's via email or on phone, but we'll be happy to talk to you and hear your ideas and your input as well. Is products over capacity? Not quite sure what that means, but we have a lot of capacity to build our products. Our reps can certainly handle the products that are in their bag. And we're not even close to saturating the market. I mean, we're at 1% penetration of our overall total available mark. The thing that we have the highest penetration in is with Equine Olsen. And even there, it's only about half probably in the U.S. market, and that's being kind of generous to us. So plenty of upside opportunity for that as well. Are you going to ask a reverse split again? Number one investor question on all platforms. I think we heard very clearly earlier this year that our investors would prefer not to execute a reverse split, even if it meant to bring the share price above the potential delisting threshold. We heard that, so you haven't heard us talk about requesting a reverse split again for basically for that reason.

And I think there's no more phone call ones. We'll take one more because we're coming up right on time. Is, well, here's one. Mike should be the new CFO. He did a great job. You're

smiling. Let's see. Is marketing in China and the horizon? So I will say that we have a distributor in Hong Kong. In Hong Kong, we have a distributor that sells the SEC products. And this past year has also begun to take on the whole set products. And just recently it indicated that they want to start selling that Guardian. That's Hong Kong. China itself is sort of a different, or mainland China, I should say, is a little different. And there we would go through a more robust distributor. And at this point, we don't, frankly, we don't have one actively engaged, although we often get requests. So I think with that, I think we're right at time. So let me just conclude by by saying that, as you've heard, your company's come a long way in the last three years. We expect to go a long way from here. And on behalf of our employees, veterinarians, pet parents, and our pets and yours, thank you again for your support of Samedika

and for your time today. Appreciate it. Operator, thank you.

This concludes today's conference call. You may now disconnect. Thank you, everyone.