Aurora Spine Corporation

Good day and welcome to the Aurora Spine Report's first quarter fiscal year 2023 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Adam Lewinsteiner. Please go ahead, sir.

Thank you, Chuck. Welcome, everyone, and thank you all for joining us today to review the financial results for Aurora Spine for the first quarter fiscal 2023, ended March 31, 2023. With us on the call representing the company today are Trent Northcutt, President and CEO of Aurora Spine, and Chad Klaus, CFO of Aurora Spine. Before we begin, I would like to remind everyone that statements made during this course of this call may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Act of 1934. These statements reflect current expectations concerning future events and results. Words such as expect, intend, believe, may, will, should, could, anticipate, and similar expressions are words that are used to identify forward-looking statements, but their absence does not mean a statement is not forward-looking. These statements are not guarantees of future performance and are subject to risk and uncertainties and other important factors that could cause actual performance or achievements to be materially different from those projected. For full discussion of these risks, uncertainties, and factors, you are encouraged to read Aurora Spine's documents on file with CDAR. including those set forth in periodic reports filed under the forward-looking statements and risk factors section. Aurora Spine does not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. On this call, management may refer to EBITDA, adjusted EBITDA, adjusted net income, adjusted EPS, which are not measures of financial performance under generally accepted accounting principles or GAAP. Management believes that these non-GAAP figures, in addition to other GAAP measures, provide meaningful supplemental information regarding the company's operational performance. Investors should recognize that these non-GAAP figures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to and not as a substitute for or superior to any measure of performance prepared in accordance with GAAP. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures in accordance with SEC Regulation G can be found in the company's earnings release. With that, I'd like to now turn the call over to Mr. Trent Northcutt, President and Chief Executive Officer of Aurora Spine. Trent, please proceed.

Thank you, Adam. I'd like to welcome everyone to the Aurora Spine first quarter fiscal 2023 financial results conference call. Earlier today, we issued a press release detailing our financial results. Hopefully, you've had a chance to review this news release. But if not, a copy can be found on our website at auroraspine.com, under the Investor section, or in other financial websites. To lay out the agenda for today's call, let me first summarize a few key events for the quarter. And then I'll take a bit about the status of each one of our key initiatives and products like Zip and Silo, as well as our initiatives on the Spine Division, including DEXA product lines. Chad will then give a recap of the financial results, and we will then conduct a Q&A session at the end. So let me talk to you about the key events of Q1, the market overview, the dynamics of the new products, and our clinical studies. The first quarter of the fiscal 2023 was a transitional quarter for Aurora, where the industry had managed certain reimbursement changes that affected our SI joint division, which in the interim has been resolved. We've also added new sales personnel during this time, and we will start to establish new relationships to renew our sales strategy. We believe that these changes and investments will be beneficial to the company later fiscal in the long term. Despite these short-term issues, the company has several key initiatives that were positive events, including the initial surgeries of our new siloed TFX product, which has been successfully implanted into patients. We are currently building inventory to ramp up for the new release of this product slated for the third quarter of 2023. We also embarked on clinical studies, which many of our products during the 2022 into 2023. That is important to have this data to share with the industry when selling our products. As we receive early positive results from our ZIP device, it continues to build momentum ZIP to act as a key contributor to the company's sales, and as the product has recently received approval reimbursements, but is versatile and is starting to gain momentum in the marketplace as more professionals, including neuro, ortho, and pain interventionalists, are recognizing the value of the zip line of the product and to others. We believe that the true vision and intent of this product is now coming to fruition. Looking into 2023, we believe that the proper track for continued revenue growth. While the first quarter was slower than anticipated, we took time to make some changes to prepare the company for the long term, including adding some new personnel. On a macro level, we continue to see momentum gaining in the minimally invasive surgery market, especially in regards to the reimbursement coding, as insurances are embracing more procedures that can be done in a minimally invasive manner and have the patient recoup at home in a quicker timeframe. Aurora's products like the Zip and the Silo are very complimentary to doctors and their patients and especially designed for minimally invasive procedures. I believe that these catalysts, while our products are able to gain traction, will be well received. Moving on to DEXA. We continue to work diligently in placing the kits. We are identifying appropriate homes for these kits. We feel confident that they will be able to place these kits by the end of the year. That said, in order to attract appropriate health care professionals, we will be starting to offer certain training capabilities for the DECSA C to immerse them into the product and to the technology. While training isn't required, we believe offering some training will be necessary to get the doctors to fully embrace the technology. Our goal is not only to have them use DECSA C, but to continue to use the entire platform as well, especially as we will have DEXA-L available in the near future. To summarize, I'm extremely proud of our team's performance and staying focused on building this company. We are well positioned to take advantage of growth markets and several new proprietary products. We will remain focused on penetrating these markets further this year through continuing training sessions and clinical trials. Looking to the longer term, as well as positioned for success, We especially have the new products and more clinical studies providing out of our technology and education for more doctors on the benefits of using Aurora's products. We remain highly focused at the opportunities that are in front of us and continue to invest our growth with each of our major platforms, Zip, Silo, and Dexa. I will now turn the call over to Chad Klaus, Aurora Spine CFO, who will review the financial results. Chad, please proceed.

Thank you, Trent. With numbers highlighted in detail in the press release, let me focus my comments on a few areas and provide some color where I can. Total revenues for the first quarter of 2023 were $2.93 million, a decrease of 17.5% compared to the $3.55 million the same quarter a year ago. The lower revenues are due to less sales of the company's silo algorithm system, due to reimbursement coding change, and slower sales in the spine division. Gross margin on total revenues was 52.2% for the first quarter of 2023, compared to 53.5% in Q1 of 2022. The gross margin is slightly lower due to product mix, but remains strong historically. Total operating expenses were 2.19 million for the first quarter of 2023, compared to 2.29 million for the first quarter of 2022, Operating expenses slightly decreased, primarily due to lower G&A and marketing expenses. EBITDA was a negative 0.38 million for the first quarter of 2023 compared to a negative 0.15 million for the first quarter of 2022. EBITDA was lowered due to lighter revenue levels for the current quarter. Net loss was 0.662 million, a negative 0.66. For the first quarter of 2023, compared to the first quarter of 2022, which was a loss of 0.387 million, basic and diluted net loss per share was a negative one cent for each, for 2023 and 2021. During the balance, turning to the balance sheet, the company ended the fourth quarter with approximately $362,000 in cash and cash equivalents. During the quarter, we received approximately $700,000 in proceeds from the conversion of warrants. Accounts receivable decreased sequentially, but we continue to remain highly focused on our cash collection and believe that we'll be able to lower these receivables over time. Our inventories are flat during the quarter as we've made a fair amount of product to prevent any shortages of materials. We continue to monitor our expenses and have tight control of our costs. That concludes my comments. I'll now turn the conversation back to Trent.

Thank you, Chad. Before we open the call for questions, I'd like to conclude that we continue to make improvements internally to make sure that we remain on track for continued revenue growth. We obviously have more work to do. but the company is in a very good position to capitalize on the IP improvements we've established in the past 18 months. We are highly successful in creating new proprietary products, and now it's time to demonstrate that we can scale the company on the commercial side of the business. I appreciate everyone's patience, and I believe we are in the early stage of reaping the rewards of our efforts. With that said, operator, we are ready for any questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Tom Fedykin with MicroCap Connection.

Please go ahead. Hey, good morning there, guys. Thank you for taking my call. I want to dig into some questions regarding really the capital on hand, cash on hand. We've had two quarters of pretty sizable losses and $360,000 on the balance sheet. At what point in time are we looking at doing a capital raise?

Good morning, Tom. Yeah, obviously we are taking a close look at our cash position. We have improved just recently on collections. We've seen some people that were slower in the payment schedule actually come through for us. And so our cash position is actually – has improved even from this press release. So it doesn't mean that I'm not looking at obviously making sure that we're stable financially and making sure that we have appropriate cash for operational expenses. So it's in our discussions now. I've had conversations with our board and I haven't accepted any financial raises or anything, but I am discussing it as either a possible bridge or potential investment into the company.

Okay. And in regards to that, I know David Rosenkranz has got a debenture, I believe it is, that is outstanding. Has he ever thought of converting that? Because my understanding is that to do a financing or to have a bank loan, I should say, that might be an issue in that he's got first right on the debt of the company or the assets of the company. Has that ever been discussed about converting the shares or his owings into shares? And second to that, I guess, if a raise was to take place, given the rollout of... um, of all these new products that are coming out of Dexa C, of course, continually rolling, rolling out siloed TFX, um, you know, how much capital would we be looking at? Two million, $4 million? How much money?

Uh, so the answer to the first question, yeah, I mean, David, uh, Rosenkranz, our chairman, has been, you know, obviously a great ally to the company and a strong leader on our board. Um, you know, he, um, is, is definitely, uh, here to help the company in any way that is possible with the company. So I'm not going to put words in his mouth. Obviously, he's here firmly on our side to make sure that things continue to run smoothly with the company. And we'll obviously make adjustments where we need to. If he wants to participate in that type of selling off of his warrants, that will be a decision he makes. So obviously he's active. David and I speak every week and it's very hands-on, which is a good thing for us to be in. The second part of the question is, I did say that we are seeing some bright lights on the collection, which has been promising. I'm not saying people won't continue to hold tight on their purses, but we did get a little bright spot over the last couple of weeks here, seeing some improvement in areas where money was finally being released. I'm not trying to pat myself on the back too hard, but I was aggressively and diligently being, I was on the AR collections team for a few weeks, just, you know, just dialing the phones and getting people to pay their bills. So as far as how much money would we have to pick up a lot of the bring in, if we did do a raise the the good news is most of the products that we, that we've been talking about for a while, such as DEXA-C and siloed TFX, a lot of those products have already been built up and built out. So we're not going to have to grab extra money for those products. The TFX product, as of today, is on time with its scheduled release. We feel confident that the TFX will – fill in the gap that is obviously the hole that got created in our revenues with the T-code reimbursements on the silo Allagraft systems. This was a problem, you know, we're the publicly traded company, so we're the ones who get the most attention on this space, but many of the Allagraft SI companies are also dealing with the same T-coding reimbursement challenges. So we we are very confident and, uh, and I'll boldly say that I know the TFX will fill that gap and actually, uh, come up and out of it, uh, on top because the product is performing well in its trials and the TFX product has already, uh, added some additional revenue to the company, uh, that we needed and is getting a favorable reimbursement. On the DEXA C side, um, The challenge there is just simply been getting it approved at the facility. It's not a matter, does the doctor like the product? Does the doctor see the advantages of the product? The answers to those questions are yes. I sweep the phones regularly asking the doctors, how are the patients doing? How are the patients responding to it? And they're all very, very impressed. Many of the accounts that we had slotted for DEXA-C implants were simply the hospital just hasn't given us the approval yet to have the product available. So we continue to sell the product and we continue to get the product introduced to doctors and there's many people who want to use the product, but it's still just not available at their facility for committee approvals within that facility.

As for the accounts, get back to the accounts receivable for a second. With increased growth, if you double your business, I would expect that you would double the accounts receivable. That's kind of where I was coming up with maybe $2 million to $4 million required to raise for future growth. Would that be a correct assessment?

Yeah, that's a fair comment. We're not internally discussing $10 million raises or anything like that. That's not the conversation we're having. We're just basically talking about more of a bridge extension of making sure that we can execute. I reset the sales organization. We have new salespeople who've come in. We've doubled down on education. We added a clinical specialist in the field to help support Chrissy. We hired a regional manager that's already put up new numbers for the company, brand new revenue for the company. And we're adding more regional sales management, which we are confident will bring new revenue for the company in areas that we don't currently have strong revenues. So this will be new business for us and it will be focused on the ZIP, the silo TFX and the DEXA products as I've been discussing now for 18 months.

No, no, perfect. Now at the start of 2023, you had eight DEXA kits in the field. How many currently do you have outstanding?

Yeah, we have, we have, we have, nine kits in the field, and I believe there's another nine here active, ready to go in the office. So that puts us at 18, and I know that they'll have all of the DEXA kits beyond 20, I'll say, 20 and higher available here by mid-year. But still, like I said, I have nine extra kits that I know can be placed right now, and we are holding our breath on a couple of accounts because we're in the VAT committee, we're in the committee approval process, and we're just waiting for them to rubber stamp that approval so we can move on in and start to have the DEXA-C utilized and used in surgery. Now, with that said, I know you didn't ask, but I'll highlight that we are forging ahead on the DEXA-C multi-center study. And I think that with that, multi-center study. Similarly, what we saw with the Zip technology, where it was maybe a slow start with us with Zip, Zip became widely accepted. The study that we put out there for the DEXA was widely accepted. It was a nice crossover hit amongst the different groups of doctors you're working with. DEXA-C, of course, is very focused on ortho and neurospine market. But as much as we talk about it, and I know, Tom, you know about the product, and I know a lot about the product, we need to get more people behind more doctors, more surgeons who know the product, have the ability for the product to be used in their center. And we think that this multicenter study that we are embarking on and do have IRB approval on will start to help the doctor with the VAC committees, with the approval committees to get the product approved.

more readily available to them because we've taken the extra step to make sure that there's a some clinical data coming out from behind it so we can support it as we enter into new facilities perfect no that's i i appreciate that that's great um as silo tfx kits um um you had three you're doing your your your uh alpha testing i guess or beta testing i guess would be on them right now uh as of the last call that is i should say I'm presuming it's still the three kits. How many kits do you feel you'll have by year's end? And will we actually see mid-year 10 kits in the field? What should investors expect when it comes to the siloed TFX?

We'll have closer to 20 kits by the second half of the year, and I mean like Q3, in Q3. We've got some really positive results from the doctors. We've done a blend of ortho, neuro, and interventional doctors have used the product with some really good clinical results. We're coming up to our first almost six months of use of the product because we had our first alpha sites done right away. So by July, we'll be into our first six-month outcome with the product. We're on schedule with the product as far as the instrumentation and the implants. Our in-house manufacturing team has done a magnificent job of making the quick changes that we saw clinically in the product. And we were able to do that quick pivot on updating of the instruments. And the x-rays that I've seen, the comments that I've received, are very encouraging, and I know it's going to fill the hole that we were seeing from the second half of last year. Tom, when you started to hear my concerns on the coding reimbursement on the T-code, how concerned I was with that and how it directly affected our sales revenue, and this is why we made changes in sales, but we were also very optimistic about what the TFX was going to do, but we didn't get our FD approval until October of last year, did our first uh, cadaver lab course. Once we had the first kit available for the course to be able to teach on the product, which was in February. And that's where we got the alpha sites. We've quickly worked through all the, the, uh, the, uh, the modifications that were needed. And we've already performed two TFX along with zip, um, trainings. We combined the trainings. We've already done two of those one on the West coast and one on the East coast, uh, to, um, about 20 physicians on that in those trainings, and we've got 100% approval from those doctors that they are going to use the product.

Wonderful, wonderful. Now, of the siloed TFX kits that are currently out and even moving forward from an expectation standpoint, How many procedures should we expect per doctor per month based off of what you know from the silo in the past? And, of course, now this is the new upgraded version of silo, the TSX. Can we expect to see similar numbers as to what we saw with the silo? Yeah, I'm seeing... Ten procedures a month? Or is there a number we can expect?

Yeah, I'm looking to obviously be consistent at 10 cases per month starting next month but quickly moving up past 25 procedures a month going into July and then with as high as 35 procedures per month. We've seen an increase of reimbursement on the device by over $3,000 from our $9,000 average sell price of silo to now we're getting uh over twelve thousand dollars for tfx so we're we're encouraged by that because we've seen some additional pricing come in that's even higher so we'll we'll be able to maximize on that and again the kits are performing real well um the outcomes you know inside the operating room are looking promising and we've already different procedures that have been booked out on personal injury cases, work comp cases, Medicare, and in private payers have all paid so far on the siloed TFX. So that's also a nice promising spotlight in a darker Q1. Okay.

And I'm sorry, I'm going to skip back to DEXA for a sec because it's something that dawned on me that I didn't ask. And that is, how did DEXA perform in Q1? We didn't see any language in the press release as to the success of DEXA. Did we see, was it a successful quarter? What percentage revenues was it for the quarter? Are doctors still performing 10 surgeries per month per doctor with the DEXA-C?

DEXA-C was down mainly because one of our key users of the DEXA-C product was out, and he was a high performer of the product for us. So that really hurt us. He blew his shoulder out in December. So all of essentially Q1, he was out and recovering. He is back. We've got some more surgeries with him scheduled. He had changed to another facility. The pricing is lower than where we were at the other facility, but we have different users, a bigger blend of doctors using the product. We just don't have all the approvals. One of the big facilities that I was counting on last year, one of the major universities that's part of the multi-center study, they had pushed the VAT all the way back to June of this year where we thought we were going to be able to do about 20 levels a month with that university in December, and then the committees pushed us all the way to mid-year at that particular university. We hope that we don't run into those type of issues. We don't think we will, but that one was obviously earmarked to be a revenue generator for us, but turned into a longer committee approval process. So DEXA is out there. I think the The challenge for us is just simply getting doctor familiar with the product and getting our sales team focused on the DEXA technology versus the TFX or the ZIP product. It's a matter of just picking the products appropriately on that sales call. And we've added a new field trainer to help support Chrissy's division to help train the doctors on the product. So that way they don't have to come to a lab and also, you know, every single time. And then also just to be in front of the distributor, this new field trainer, which we added here in the first, you know, at the end of the Q1, he joined us. He is out actively training doctors and distributors, which is the key part here, the distributor and the distributor reps on YTFX, YDEXA, and how the distributor can make money off of these products by introducing these technologies that are, in our opinion, our door opening products in that area. And to our, more of a surprise, many of our distributors that were carrying Zip and Silo didn't know we had DEXA. So that was clearly something that we saw and we fixed and we added that new component to the company so we could get better awareness and better training in the field. that technology and our new tech support gentleman who joined us is very very excited about the technology and is actively out right now as we're speaking you know talking to distributors and doctors and covering some surgeries that were needed so we don't lose the sales cycle because one of our sales people stuck in a surgery the clinical specialist is out in the field covering those procedures for us perfect and do you feel you have the

the full roster of staff that's required moving forward, or are there still holes that are needed to be filled?

Well, internally, we feel good internally. Externally, as far as sales goes, Matt Goldstone is running in a series of interviews right now with different areas, and we have two new offers that are going out this week to salespeople that we believe will be impactful to the company. Sales-wise and the roster that I see here on my board, he's got eight more salespeople, so six more out of the two that he's making offers to that are in strategic areas around the country and parts of the country that we're just not either strong in or we just don't do anything at all there or areas that we think we need to improve on. We'll be adding those people here in the second quarter. or early Q3 at the latest. But that'll be all those salespeople will be joining us as fast as we can get them signed on.

Again, if you have a question, please press star, then one.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Adam Lowensteiner for any closing remarks. Actually, we just received a couple questions that came in. I'm so sorry about that. Our next question will come from Sergio Heiber with Heiber Research. Please go ahead.

Hi. Good day to you guys, Trenton, Chad. Thank you for taking the call. My job is to ask what Tom may have missed. So do you want to give any revenue guidance? Do you want to change the revenue guidance that you gave previously, or are you sticking with it?

Good morning, Sergio. So we were chasing to get ourselves at about 1.5 million. That's what we were shooting towards. We'd actually felt in our sales forecasting from the field that we were going to be somewhere between 1.4, 1.5, but the team had some shortcomings within those estimates, so we've regrouped the team. to be more accurate on our forecasting. So until I can get the team to accurately forecast consistently, I'll hold on where that number is. It doesn't change what we're shooting towards. We're shooting to obviously to be profitable, number one. Two, to get to a point where we can get on a regular sales revenue above the $1.4, $1.5 million number. That's where we want to be. That's our first milestone that we're trying to consistently be at. We've shown improvement here in the second quarter from the first quarter, so that's the step in the right direction, but we must continue to take steps forward. We have to get the TFX system out into the market because the sales shortcoming is primarily off of the T-code on the silo allograft SI joint system. The reimbursement was a concern of doctors, and so the procedures had dropped significantly. In fact, in the beginning of the year, it went down 70%. So that's why we are looking to re-forecast the sales, especially in the SI market, based upon the release of the TFX system, which we believe will be able to fill in the shortcomings of that device and then also add new revenues to the company above and beyond the shortfall of the silo allograft system with more firepower out in the street, which would be more salespeople.

So without getting more DEXA seed kits out, the revenue for the next quarter is not going to be as good as last year's. So can you give more color as to what is taking so long with the Dexaseed, my understanding is that you're not selling to just one hospital, it's a hospital group. So is that correct? So when you sell it, it won't be just one?

Yeah, the quick answer to the question is that Dexaseed is in the hands of different doctors. The kits are being presented to different accounts. The problem that we had with some of the accounts was that we could get the yes from the doctor, but we weren't approved at the facility. So we have to still go out, get a part of the hospital approval system where these particular procedures are being performed. We redirected our sales force to make sure that they were focused on accounts that could give us access to their facilities. It is a newer product. So oftentimes some of the hospitals and even some of the surgery centers are year to year or quarter to quarter on approvals. And we got a slow start because we weren't set up right at the end of the year with the inventory headwinds that we ran into at the end of the year going into the first quarter this year, which definitely affected on top of the silo reimbursement challenges that we went into the year. So those two things dragged ourselves down in the first quarter. Last year's Q1 was a record-breaking Q1 for us. with no headwinds of coding reimbursement and no inventory issues this quarter. Both those challenges were real but are being corrected and have been corrected.

And then you talked about doing training for DEXA even though it doesn't need the training. So will you be reinstating the formal training schedule that you had before as far as having training once a month?

we're not. So yeah, with deficit, we don't need to do a big cadaver course. It's not a cadaver, uh, type of training, but what, what we did recognize is that many of the distributors that we, uh, we're working with, we're keen on this on the zip and on the silo. But when the reimbursements went down, of course we were asking them, Hey, you need to jump in and start to promote the, uh, DEXA technology. And many of them just were not in tune with that. And that was, uh, that was, that was, uh, Short-sighted on our part, we thought that they would be able to transition these products further into their surgery centers and the hospital systems that they are working at. So what we're doing on the training standpoint is a man named Adam Ooten and then all the sales people are re-educating the distributor network that we have this technology and here's our early clinical results. So we've put more of a presence out on social media and for the purposes of showing people what DEXA technology is and that we do have good clinical results. So if that can help us get through any type of committee process approval at the hospital quicker, that here's the information for them. And hands-on educating these distributors and, of course, doctors on why this technology is. It already had a successful year. Last year we did 1.2%. two million dollars in dexa and last year i told everyone that we were only going to do about a half million and we actually beat our estimates on that product this year we're off to a slow start because we we lost one of our key users because of an injury but also due to just not sales focus they were everyone was reeling off of the the t code issue of the allograft and and we didn't get enough good information out there in front of the surgeons to use Dexa-C and I'm fixing that right now.

So Trent, I have just one last question. Is there any one big hospital group that you're working with to get the Dexa-C kits with that would be a significant achievement?

Well, we have submitted our Dexa-C with HCA, which is the largest healthcare system in the U.S., a hospital system in the U.S., Tenet, And I believe we are approved on the tenant contract now. I had to double check that, but I think we are approved on that now. HCA is on an account by account basis from different doctors that want to try it, but it's not, I don't think it's nationally approved yet. And we did an introduction of the product at the American Academy of Neurosurgeons in the beginning of At the end of March, beginning of April, we did a presentation at the American Academy of Neurosurgeons. And so we just have to wait for that to bear some fruit off of that submission. We had a podium speaker at the AA&S, Dr. Sebastian Koga, who's one of our biggest supporters of the product. And he has good clinical and biomechanical data that he has been accepted in a published paper and a published poster, and then a published release within the Congress of Neurosurgeons. So this is all new, and we're getting that out. DEXA is everything I say it is. It just needs to be in front of more people so more people understand it and more people get it and have it available to use the product because their hospital system allows them to use it. And I'll continue to fight on that and get it approved.

And then DEXA-L, you're looking to roll out in the fourth quarter?

Yeah, we have. So we're, you know, the good news is we have the FDA approval on that product. We have the testing results that are positive on the biomechanics of the product, meaning it's strong enough and it's not a product that's going to give any issues to the, for the position, obviously. We're getting those samples in and then it'll start to be integrated into into our existing standalone, which is if you look at our website, there's a product on there called Solo. Solo is a 3D printed standalone system. That system will fade out and DEXA-L will be incorporated into that. We'll roll out nine kits on DEXA-L and we have users that will convert from the DEXA-L over to the sorry, for the Solo L to the Dexa L implant, and we think that we'll pick up more traction with some new users because the product will be available. And it's part of our same submission that we're doing with Dexa C, so we don't have to go back out to run into the same headwinds. We're submitting the approval because it's already FDA approved. You can't submit products at a hospital if it's not an FDA approved product. So the fact that we already have the FDA approval now, we're submitting that pricing with the hospital as a new product line. We're doing that now while the product is still being manufactured.

And does that require more training than XSE?

No, it's certainly, it's called a standalone technology where it's an ALIF anterior lumbar interbody fusion. So we're going only – we're taking that product out to the people that we are closest to. So, no, there's not a big, giant learning curve on it. It's already a widely accepted procedure technique-wise in the marketplace.

Thank you. That's all my questions. Thank you very much. Thank you, Sergio.

The next question is a follow-up from Tom Fedykin with MicroCap Connection. Please go ahead.

Hey, Trent, three more questions, quick questions, I'll let you go. Full year sales for 2023, I know you don't want to give a target, but will you be cash flow positive for the full year or are you really trying to just exit with a one quarter or two quarters of profitability?

So I'm not the forever optimist, but I am optimistic for all the right reasons that we can be profitable Uh, this year and the second half of the year, you know, I thought that we'd get there early on this year and even last year, but with the, the T coding changes cut our business by 70%. Um, that that's real. I'm backfilling that now with the silo TFX. And if it does what I say, it's going to do. And I know that, uh, talk is cheap. The product has to perform. We have to sell the product. Um, I, you know, w w we are so close. every single month in profitability is right there in front of us. It's not like it's a big giant leap forward to be profitable. It's right there. In fact, we're even saying now that our break even is closer to about, you know, 1.2 to 1.25 for profitability. So it's not 1.5. We're profitable just past 1.2 million with the, with the tightening of the belt that we've done internally and, and the siloed TFX as it continues to roll out and get favorable results, then I backfill that 70% hit on the Allograft sales. And with that, we think we'll see more opportunity with the other devices such as Zip and Dexa-C, so that'll help us promote more of our sales growth. So I still think we're going to get to $1.5 million It's going to come sooner than it is later, but I just reset the sales team at the end of February. We made some additional changes in Q4, but it didn't really hit everything that we were working on internally until mid-Q1. And at that point in time, we were already so far behind on the Q1 quarter. But now, like I said, we're already making improvements in Q2 than where we were in Q1. we have the ability to potentially even beat last year's Q3 if we do it right.

Perfect. No, that's great to hear. Now, investors, they like to see management invested alongside of them. Now, if a raise were to happen, or even if a raise doesn't happen, you find a way where there's no need. Will we see insiders step up and buy in the open market?

It's a good question. I don't know the answer to that. I'm certainly, you know, we needed to get through, you know, the end of the year results, which, you know, we budgeted $14 million. You know, we came in at $14, almost $15 million, so we were ahead of that, but we put some extra money towards last year, hoping that we could pick up where we were starting to see the headwinds of the T-code. So this year on the stock, you know, I think that I think that arguably it's still a good stock from the standpoint that we're still here and we're still continuing to release these technologies. Last year was the buildup to make all these products. This year we just got the siloed TFX out, which will help stabilize the sales numbers. And if that's the case, then the stock price hopefully would go up. I was told many times by different people last year that I would see an increase in the stock price after I got the TFX and index results. So I don't hold my breath for much of that anymore because I just have to get the sales numbers. And I am focused on sales.

And the question was more about insider buying, sorry, than it was really the stock price. Yeah, knowing that the price is down, seeing insider buying gives investors confidence they know you're beside them, and especially if there's a raise, you know, do you feel that insiders would participate in a potential raise? Or if a raise is not required, would we see insiders step up and, you know, even, you know, buy what you can afford, of course, but see your presence?

Yeah, I'm open to it. So perhaps, you know, if we do a raise... I'll be reaching out to people and groups that would be interested in that. And internally, I can't speak for all the board members, but certainly I'm on board with buying more shares. I do buy shares in the company, so I will continue to support. I'm all in on this. This is what I'm working towards to get it right, and I have no problems putting my own money back into the company. And I hope that the board will also do the same. But I can't speak for them, obviously.

Okay, perfect. And one last question now is, do you feel that 2023 will end on a record note? Do you feel that this potentially will exit with potentially a $5 million quarter? That's the elusive number we've yet to hit, but do you think that's attainable?

Yeah, we have to really, you know, pull this thing up because I want to obviously beat last year. And that's my first goal is to get past, you know, get to the $1.5 million a month consistently. There's no reason after TFX release why we can't be there. We should absolutely be there. And then, obviously, as fast as the time will tick by, how fast can I get with that sales number up? to get past, uh, you know, 14.9 million. So I can, you know, say that we, you know, we beat last year's results and that's, those are the be profitable, hit the 1.5 beat last year's number, get our products approved in the hospital system more efficiently than we did last year. Follow up with all the doctors that we trained last year to, you know, to get them introduced to say TFX. Um, because we have a book of business. We have customers that like us. We have customers that use our products, get them to use more of our products and all that's achievable. If we just do those, those things. Perfect. So I, I believe we can get past the 15, I guess, to answer your question.

Okay. No, that's great. Uh, and I lied. There's one last question. Is there any metric or any, anything that we haven't asked as investors that we should have asked that you can think of that would, uh,

um you know kind of uh shed some light on your business that uh we haven't brought up um i i would think that the only thing that that we that we need to focus on more on the calls going forward is how are the individuals the new sales people the added sales people performing because i think there was a lot of of um you know hopeful thoughts on people that would you know sell and hit those numbers we have to do a better job of forecasting the the quarterly numbers and and we've changed our internal erp system we have now a new crm we really are focused on this because we want to be more accurate on our forecasting so that's uh i expect you guys to keep me honest on that so when we are talking about forecasting we're we're getting closer to the center of the target than being too far on the outside and that's That's going to be on sales execution, and that's why I made these changes in sales leadership.

Perfect. Perfect. Well, thank you very much, Trent, for your honesty and your time. I really look forward to Q2 and beyond. So, again, thank you very much, and I appreciate it. Thank you, Tom.

Yeah, Q2 is already shaping up nicer. It's not what we want it to be, but Q3 and Q4, because of the new releases of the products, And we don't see the headwinds at all. The T-code was unknown. I want to be clear on that. For anyone who's listening or people who believe in us, the T-code was such an unknown last year, I could barely comment on it because nobody knows. Nobody knew exactly what it was going to do. They're still speculating on it. And there's going to be a change to that allograft code in January of this coming year, and nobody knows what it means still. So last year, when it got brought up, It put people into a paralysis of the procedure in the reimbursements, especially in the interventional space. They got real nervous about if there would be any clawback in the reimbursement. We haven't seen any of that. No one has seen any of that. It's not out there. But that definitely put a freeze on us. If you look at the first two quarters of last year without the discussions of this T-code, it was very promising. $1.5 million March of last year. So we were bullish on the year for all the right reasons. And then when the T code got thrown into the mix here, it really changed the cell cycle and the user groups were less likely to use it. Now with TFX, I'm putting that behind us. Wonderful.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Adam Lowensteiner for any closing remarks.

Please go ahead. Thanks, Chuck, and thank you, everyone, for joining us. We appreciate your time and interest in Aurora Spine and very excited about what's ahead for the company in the remainder of the year and beyond. We look forward to speaking with many of you in the weeks ahead. If any of you have any questions, please feel free to reach out to myself, and we'd be happy to schedule a follow-up call with the management team. Thanks again, everyone, and have a great rest of your day. The conference is now concluded.

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