Aurora Spine Corporation

Good morning, everyone, and welcome to the Aurora's Fine Financial Results conference call. All participants will be in a listen-only mode. Should you need assistance, please send to 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 and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Chad Klaus, CFO. Sir, please go ahead.

Thank you, Operator. Welcome, everyone, and thank you for joining us today on a review of the financials of Aurora Spine for the fourth quarter and fiscal year, ending December 31, 2023, and the first quarter, 2024. With us on the call representing the company today are Trent Northcutt, President and CEO of Aurora Spine, and myself, Chad Klaus, Chief Financial Officer of Aurora Spine. Before we begin, I'd like to remind everyone that the statements made during the course of this call may be considered forward-looking statements within the meaning of Section 27A of the Security Act of 1933, as amended in Section 21E of the Security Act of 1934. These statements reflect current expectations concerning future events and results. Words such as expect and 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 the risk and uncertainties and other important factors that could cause performance or achievements to be materially different from those projected. For full discussion of risk and uncertainties and factors, you're encouraged to read or respond to documents on file with CDAR+. including those set forth in the periodic reports filed under the forward-looking statements and risk factors section. Correspondent 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 referred to EBITDA, adjusted EBITDA, adjusted net income, and adjusted EPS, which are not measures of financial performance under the Generally accepted accounting principles are GAAP. Management believes that these non-GAAP figures and distance to the GAAP measures provide meaningful supplemental information regarding a company's operational performance. Investors should recognize 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 or superior to any measure of performance prepared in accordance with GAAP. A reconciliation of non-GAAP measures and most And the most directly comparable gap measures in accordance with SEC Regulation G can be found in the company's earnings release. With that, I'd like now to turn the call over to Mr. Trent Northcott, President and Chief Executive Officer of Aurora Slime. Trent, please proceed.

Thank you, Chad. I'd like to welcome everyone to Aurora Slime's fourth quarter and fiscal year 2023 and the first quarter 2024 financial results conference call. Yesterday, we issued a press release detailing our financial results for the first quarter of 2024. 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. That's www.aurora-spine.com under the investor section of our and other financial websites. To lay out the agenda for today's call, let me first summarize a few key events of the last two quarters. For the first year of 2023, we talked about status of each of our key initiatives, products like Zip and Silo. Chad will give you a recap of the financial results, and then we'll continue with Q&A sessions at the end. As the tide of momentum continues to surge, we find ourselves at the forefront of riding the wave of innovation with Aurora products, including the revolutionary Zip and the trans-framinal Silo product, tailoring our minimally invasive procedures successfully their ability to offer alternative treatments past steering clear of excessive path medications in the midst of an opioid epidemic. The launch of the Silo TFX marked a pivotal moment in our journey, unlocking a vast realm of possibilities in the SI joint pain market. The release of the Silo TFX was a tremendous event for our company and the Silo franchise, immediately accepted by the pain market, orthopedic market, and neuromarket. The silo sales were strong at 1.33 million in the fourth quarter of 2023, and we exceeded that by 1.41 million in Q1 of 2024. And let's not forget the resounding success of our ZIP series. The interim results of this clinical study published by the Pain and Therapy speaks volumes, with 82% of our patients reporting improvement and 65% clinically meaningful pain reduction, It's clear that the ZIP device is not just an effective product, but it's also safe, ushering a new era of lumbar spinal stenosis treatment. ZIP sales continue to be strong, with 6 million in sales in 2023 compared to 4.7 million in 2022. That's a $1.3 million increase. Increased marketing for the ZIP51 implant paid off, sales surging from 185,000 in Q1 in 2023 to to 624,000 in Q4 of 2023. Overall, Zip sales increased 1.53 million in Q4 of 2023 to 1.63 million in Q1 2024. As we turn our gaze to Dexa, the company is making efforts to revive our clinical business, cervical business through hiring some new spine-focused sales staff, increase the marketing of our orthoneurosurgeons. With our IRB approval in hand and the Steadfast sales team, we're poised to place the Dexa-C kits in capable hands of doctors who will be ushering in new standards of care. Looking into 2024, we believe that we are on proper track to continue revenue growth with the second consecutive quarter of $4.1 million plus in sales. We continue to expand our sales force in the new year, into new regions in the country, allowing the company to cover more surgeries, internal staff, which will lower our commission costs across the board. 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 the growing spine and pain markets with proprietary products. We remain focused on penetrating these markets further this year through continued training sessions and clinical trials. I will now turn over the call to Chad Klaus, CFO, Aurora Spine CFO, who will continue the financial results. Chad, please proceed.

Thank you, Trent. The numbers highlighted in detail in the press release let me focus on a few areas. During the three months ended December 31, 2023, we generated revenues in the amount of $4.04 million compared to $3.61 million in the same period of the previous year, an increase of $434,000, or 12%. Quartasol increased activity in the pain market with an increased silo joint sales, silo joint implant sales due to silo TFX relief and the continued growth in Zip Implant. For Q4 2023, cost of sales was $1.75 million and gross profit was $2.3 million as compared to $1.78 million and $1.83 million respectively in the comparable period. Gross margins in the current period were 46.7% of revenue compared to 50.5%. 50.6% of revenue in a comparable period. Higher margin was due to increased sales of higher margin implants and lower distributor costs offset by higher shipping and royalty costs. Operating expenses during the Q4 quarter were $2.58 million compared to $2.67 million during the same period of previous year, a decrease of $85,000. Operating expenses were lowered during the current quarter, primarily due to decrease in research and development. Marketing costs and software costs offset the higher salary costs. Salary costs increased as the company hired more salespeople. As a result of the above, the impact during the three months ending December 31, 2023 was 109,734 compared to a negative 358,003. during the same period of the previous year, an improvement of $468,000. During the year ended December 31, 2023, we generated revenues of $14.5 million compared to $14.8 million during the previous year. This is a decrease of about $356,000 or a 2.4% decrease The decrease is primarily due to coding issues with the silo allograft product and decreased cervical implant sales. Year-sold medical coding changes for the silo allograft implant that led to decreased sales. However, the company released the silo TFX implant that was sold under the existing medical coding. The silo allograft implant was given a permanent code in 2024. During the year ended December 31st, 2023, cost of its sold was $6.3 million. and gross profit was 8.2 million, or 56.5% of revenues during the year ended 2022. Cost of goods sold was 7.1 million, and gross profits were 7.8 million, or 52.5% of revenue. Change in margin is due in part to changing product mix, particularly an increase in dip in siloed GSX sales. Operating expenses during the year of 2023 were $9.9 million compared to $9.4 million the same period previous year. Increase in operating expenses primarily due to increased payroll, reconstructed commissions and insurance. The company hired more salespeople for direct sales. As a result of the above, EBITDA during the year ended December 31st, 2023 was a negative $311,000 compared to a negative $265,000 the previous year, a decrease of Q1, 2024, during the three months ended March 31st, 2024, the company generated revenues in the amount of $4,013,801 compared to $2,958,088 at the same period the previous year, an increase of approximately a million dollars or a 35.7% increase. Current quarter saw increased activity, in the pain market and increased SI joint plant sales related to silo teal tax and continued growth in ZIP and plant. The company has been targeting the pain market with increased marketing, training, and new product releases, and an increase in sales force as a result of the changing product mix with large increases in our ZIP 51 and silo PFX sales. During the quarter, cost of sales were $1.53 million. And gross profit was $2.48 million, as compared to $1.43 million and $1.53 million, respectively, in the comparable period last year. Gross margin in the current period was 61.9% of revenue, compared to 51.7% of revenue in the comparable period. Gross margin was higher due to increased sales of high-margin implants and large studio commissions offset by higher shipping costs and royalty costs. Operating expenses in the current quarter were $2.75 million compared to $2.19 million in the same period previously, an increase of $560,000. Operating expenses were higher during the current quarter primarily due to increased sales staff offset by a decrease in research and development and professional fees. Salary costs and travel costs increased as the company hired more salespeople. As a result, above EBITDA during the three months ended March 31st, 2024 was 117,000 positives compared to a negative 377,000 during the same period of previous year, an improvement of $495,000. That concludes my comments. I'll now turn the conversation back to Trent. Trent.

Mr. Northcutt, this is the conference operator. Is it possible your phone is on mute? Thank you. Thank you, Chad.

Operator, we are ready for any questions. And ladies and gentlemen, at this time, we'll begin that question and answer session. To ask a question, you may press star and then one on your touch-tone telephones. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. Again, that is star and then one to join the question queue.

We'll pause momentarily to assemble the roster.

Our first question today comes from Tom Petition from Microcap Connection. Please go ahead with your question.

Hey, good morning, guys. Thank you for taking my call. I'm curious, Q1 we saw sales, they declined over Q4. I know in Q4 we had the Dubai conference which affected sales. Can you speak to Q1 just in general, the revenues? Traditionally it's a bit of a weaker quarter, but more importantly, I guess, Really, the outlook moving forward, will we see a ramp-up of sales into Q2? It just seems that sales were quite flat in Q1.

Actually, I disagree, Tom. I think Q1 sales, from a historic standpoint, were way ahead of where we were in the previous years. January 2023, we did $849,000. February, we did $960,000. In March, we did you know, $1 million. So in 2024, we were able to average nearly, you know, almost 1.4, it's an average per month in the Q1. And we had on the books, scheduled wise, we had over $5 million scheduled, but due to weather, and we also had one of our top surgeons in our group had a hand infection. So he lost a couple weeks of surgery, which affected some of the numbers. And then we had another major, one of our contributor doctors leave their practice to join another practice. So only in the last couple of weeks of the first quarter, did we have a slight change in it, but momentum wise we had on the books, like I said, $5 million recorded on the books on the calendar. So we were heading in the right direction.

Okay. Okay. No, it's just, just looking at the last three quarters are all right around 4 million. And that's why I asked, uh, When do we expect to see the hockey stick kind of growth? I know we've seen the tweets and whatnot of 24 million and 24, and at some point we have to see the ramp-up of sales, which does lead into kind of a secondary question, and that is with the ramp-up of sales and accounts receivables increasing, Are you able to achieve both keeping AR down but at the same time ramping up sales? It seems to be a tight, it's a balancing act right now.

It's always a balancing act, but let me address the first part of the question. The goals that we set out last year and going into this year, which is what I was really clear on when I kept talking with everyone, and the number one goal of the company was to move towards a profitability mark. That was goal number one. And that's where we were striving towards. We certainly would love to get into a mode of hockey stick performance, but we got to be profitable first. And that was the key goal for us. And that's what we did, you know, showing positive EBITDA after Q1. And we were able to extend that up and over the growth of the company Q3, Q4, going into Q1. And we see that trend continuing going into Q2. I think if we continue to stay positive, focused on on on those type of revenue goals being profitable executing on those sales we'll hit some we'll miss some but we're certainly uh in the game and we're constantly pushing forward now to address the second question which was uh ar collections um we're addressing that head-on we're jumping into it both feet we're we're have a stack of of new interview people that we're bringing in to help us collect faster on the on the ar collections We're in constant communication with some of the accounts that have the highest AR debt with us, and we feel very confident in most of those that they are able to get their finances on track to be able to get their payment back to us on track. So I feel good about most of it, which is the bigger pieces of that AR revenue number.

Can you speak to the concentration of the accounts receivables, like what the size is of some of the largest debtors? And maybe at the same time, talk about the collectability of the AR. How much is in 30 days, 60 days, and 90 days? If you can kind of just give investors an idea as to... What sort of payment schedule are we looking at, and if it's spread out equally over the course of 30, 60, and 90?

Chad, I'm going to let you jump into more. Yeah, I can do that one.

Concentration isn't too bad. I think we've got two accounts that are in the $400,000, $450,000 range. One of them had been at $1.4 million at one point, and they've paid it down to $400,000 over the last year and a half. another account. It's $400. They're getting refunded this month, and they promised to pay that all off. They've had a good track record with us. We're not really concerned there. As for the stuff over 60 days, I'm sure is what stands out in the financial statements, and I'd like to say that we've collected a large portion of that already. Our DSO is historically anywhere between 75 and 90 days. So while it looks extended in the financial statements, I think that people are paying within that window. We've got some people that pay within 30 days. We've got some people that pay within 60 days. But the majority will pay within the 75 to 90-day window.

Perfect. Okay, thank you. And on a go-forward basis with the ramp-up of sales, you brought on, of course, new sales directors and you're anticipating increased volumes of surgeries. Do you have the wherewithal to continue on without the need to do another financing?

Yeah, we believe we're not in any conversations of refinancing. Two of the major people that have the depth into us, one of them we're super close with. It's one of our top accounts. And they're moments away, in their words, from closing some financing that they're doing in their organization. They've been very communicative with us, and we believe what they're telling us. The second one that Chad mentioned, uh, we've been constantly in contact with them and they're, you know, they're paying chunks of $50,000 and constantly pushing towards paying us back. And, uh, yeah, so we're not, we're not in the market of raising any capital. We're heading down full focus and that's being, you know, being profitable and keeping that positive, uh, uh, uh, even that rolling forward keeps us in a position of strength and we'll pick, we'll get this, uh, AR down. It's going to, it's, one of our top goals for this first half of this year is to get the AR paid down, way down.

Okay, good, good, good, good. How many new sales directors do you have on right now? And as we move into 2024, are you noticing a ramp up of revenues as a result of these new directors? Any standouts?

Yeah, we certainly have some good standouts in the organization. The key areas that have really helped out were, you know, we did last year, we added somebody really strong in the West. They constantly run, you know, way over a hundred percent to forecast every single month. They helped bring in one of our largest, newest accounts, which was the last, last year. And that particular account last year was like number three on the list. And this year they're going to be number one on the list as far as like total revenue for the company. And just that person alone is out helping us talk to other colleagues and telling them what success he's having in his clinic and in his specialty. And we really appreciate that. So he's been at the forefront of helping us lead the charge. He's helping us make introductions with people. We've been actively involved in their congresses, meeting with more and more of those colleagues. And we're showing it with not just sales moxie, but we're showing them with The multicenter study that we completed and is still ongoing with the Zip device, which is why Zip sales are continuing to charge upward. We started a campaign last year as part of that conversation with that account that we would work on the promotion on the Zip 51. And the Zip 51, as you probably saw in the press release, grew 193%. And it was real revenue, like it was a real revenue increase compared to $185,000 all the way to over half a million dollars in sales. And that's, you know, that's our product. It's our IP. We machine the majority of those implants here in-house. There's a lot of those implants now implanted across the country with really great clinical results and helping the company grow and helping patients get better.

Wonderful.

How many of those sales directors do you have? We have over 10 people in the field. The regions, I'm going to step away from my computer here, but we are looking at the map. We've got the Northwest is now just as of 45 days, 60 days tops. Now we have a really strong regional sales director up in the Northwest, which we've never had one in the history of the company. We've added a person in the Michigan Upper Peninsula, Great Lakes area, a strong person with a spine and a paying background. Steve, you know, in the Arizona area, we never had a regional manager in that area. That was added. He came in last year, and he is now regularly growing at over 100% forecast. We added... personnel in the Mississippi, Alabama, Tennessee area, the Georgia, Florida area, North Carolina, South Carolina, West Virginia, and a new RSD up in the Northeast. And we're going to fill in a new RSD in the kind of the upper four corners. So that Utah, Wyoming, Colorado, and we're close to getting somebody on track in the right up the belt of the Midwest, say in the St. Louis area. We have a VP of sales who lives in Chicago who's VP of the East, and we have a VP of the West who's in Nevada. But we're about to add two new people up there in the Midwest, which we think will be really key to us. We're one head count down on our goal, but we think we'll take two steps forward with adding on two new people here in the coming weeks.

Nice. Can you speak about the increase in margins and the results of bringing on these new sales directors having an impact with the margins, given it's more of a direct sales approach versus the distributor model that you were doing before? So maybe you could break that down a little bit and speak to the margins that you've currently got and if there's ability to even improve the margins going forward.

Yes. Margins, the increase of margins is going to continue to push forward. And a lot of that becomes down to what we did historically. One, we did all these trainings. We didn't have regional coverage and that was our, that was our problem. We did a lot of trainings with doctors over the last couple of years and there was doctors in certain areas that we just didn't have the right or have anybody for that matter in those areas to be able to give them that corporate touch, to be able to give them that surgical support. And what we, What that translated to is that those doctors that did get trained on those products, now that they're starting to come around to use our products because there's somebody there in their backyard who can support them, we didn't need a distributor in that area because we were able to cover those cases directly ourselves, which is obviously a big increase in revenue for us, an increase in the profit margin because we're not having to pay as much out to the commission to an independent distributor. Now we love our distributor network and in pockets of the country that we just don't have access to. That's where distributorship is really, really strong. And we really commend those people who help us out there in those areas. But as I mentioned to you on the map, we've got areas that we're going into and we're able to get more and more penetration in those areas with our regional sales directors. And then part of our strategy going into the second half of the year is after the region's been more managed in a more appropriate way, then we'll start to drop in what we call territory managers, which is essentially your direct sales reps. And we have two of those right now. One of them is, for example, in Utah, where that's her job is just to manage that area. She only stays within that driving within a two-mile radius in every direction to manage those accounts in that area. That's her job. And she does a really good job in that area. And we're going to continue to add those type of PMs in the country where we don't necessarily need a distributor, but we'll be able to have our direct sales. And that should show an increase, if I'm right. I think it'll happen as early as this quarter. And going into the next quarter, we'll see an increase quarter over quarter, you know, by percentages each quarter going forward.

Yep. And speaking of percentage increases, with all these new sales directors coming on, it takes three to four months, I understand, to train a new sales director. When do you see sales really, really ratcheting up? I know the last three quarters have been around $4 million. And can we expect to see a $4.5 million quarter here soon? Is that something that you see And, you know, as you look forward, what sort of growth do you anticipate we should see in 2024?

So in 2024, we're still eyeing to achieve over $20 million in sales as our goal. That's what we have internally. You know, we started the year off in December. We said, well, let's make it a goal to try to get 24 and 24. And then as we got into the year to kind of get our feet underneath us, We said, okay, we still feel confident that we can get over $20 million in revenue. I'm not giving any guidance, but I'm just telling you what the internal goal is and what we're trying to achieve. And in our model, we didn't build a model to be at $24 million. We wrote it down as that, and we put it into where we thought we could get those milestones to hit. But we stayed true to what we said we're going to do, be profitable, and get into this first quarter and be able to have that positive impact hit and we had over $5 million in booked revenue on the calendar in surgery. So we know if we can book 5 million, we can achieve 5 million. So if we can achieve 5 million, we're going to be able to achieve the 4.5 million that you're talking about. So we know that that's our next goal is to get up and over the consistent of over 1.5 million a month, which is what you hear me talk about all the time. We saw that consistency of over $1.4 million, which was nice because last year, We had August was 1.4, September was 1.4, October was 1.4, November was 1.5, December was down. We knew about the Dubai conference. And then we started the month off and hit the quarter off on the right step. If it wasn't for a couple changes and a hand infection, we would have hit an average of 1.5 million in the first quarter. So it was all right there, right in front of us. It wasn't... a reach. It was literally on our table. We just had to continue to keep our heads down and stay focused on that. So I'm super encouraged. That's good.

That's good. What is your break even right now? 1.4. 1.4? Okay. And last question for me, and it's more maybe a little bit of a comment and a question, is you're very good on LinkedIn. So investors should look on LinkedIn and Twitter. But there seems to be a little bit of a lack of news put in press releases out. Are you guys going to put more of a concerted effort moving forward out to try to get the word out to shareholders? For example, Veteran Affairs, the news could be posted of working with them. And I'm sure there's other things like DEXA, DEXA-L, the rollout of that as well. You know, maybe you can talk about, and also conferences. I never mentioned that Planet Microcap could be attended or LD Micro. Is there anything that you're going to do as a CEO to just make the company more, you know, bring more attention to the company moving forward to give investors kind of a feeling of, hey, you're with us and, you know, we're in this together. We want the best for the company and we're going to do everything possible.

Well, I think it's a really good comment, Tom. And number one, I am absolutely with all the investors. I, you know, I fight this fight every day, as you know, and it's still a great fight to fight because I know what we're doing is working. I know that what we're, you know, we're getting such great results with the way the products are being used in the patients, how much relief the patients are getting. We have people coming to us wanting to work at Aurora versus us trying to beg for people to come to Aurora. So I hear you loud and clear. I absolutely will start to put more press releases out there, but I only want to put out press releases that are meaningful. I don't want to put out fluff into the market. I'm trying to promote our products because we know our products like the back of our hand, but I want to get more people aware of our products. So we're having a much bigger social media presence because the youthfulness of a lot of these new surgeons and pain surgeons that are out there coming on the scene, they're very social media savvy, way beyond my years, right? I mean, they're really good at it. We're trying to get more information out there. We started off in the first quarter. There was a lot of information that came out, and we're about to come up. We have some more series of information that's going to be released in press releases. We have a very strong calendar full of events through the rest of the year. It slows down a little bit during the summer, but we were just in a conference up in the Northwest this week. We haven't put out any press release on that, but we will. We're going to be part of a big meeting in Chicago in June. And I'm looking at my calendar here. And then in July, we're at the Aspen Conference, ASPN, which is in Miami every year. And we plan on making a big splash there because we have lots to talk about. Because one year ago, We released the data on the zip, and we released the siloed TFX system because the siloed TFX is essentially one year, full year in now, and we have lots to talk about at that conference. So more press releases will be issued, I assure you.

Perfect. And I apologize. I skipped over one question, actually, and that is the DEXA-C system. You'd mentioned on the call about putting a renewed effort into the DEXA line, DEXA-C. I believe you'd mentioned that you've hired a couple of these new regional sales directors to focus more on that. Can you speak about DEXA-C? Can you also speak about DEXA-L and when you expect that to roll out? And that'll be it for me for the questions, and I'll leave it for others.

No problem. Yeah, DEXA in the overall orthopedic neuro-spine market for Aurora is a, one, I wanted to hit the year where I wanted to hit the year and be fast tracking to grow the company. But how we're going to grow this company is it has to be a blend of the pain side, of course, and it has to be a blend of the orthopedic in the spine market. So Um, the newer hires that we've brought in, we've made a conscious effort to during that interview process with different candidates. To find out, do they have a spine background? And we are, we are actively looking to put on more, uh, true, um, spine representation across the country. Even if we have to add, um, you know, a higher management person, say like a BP of, of spine to be brought in, we're making those decisions. And we are interviewing those types of people. And DEXA-L is still in the, we are in the sterilization validation. It's already FDA approved, as you guys know, but there's a process where the product has to be validated with the FDA that indeed it is sterile inside the packaging. And we're waiting for that, those results to come back. It's not a matter if we don't think it's not going to be, it's just a time thing. It just takes time. So the second half of the year is scheduled, the front end of the second half of the year We'll be able to run an alpha phase of the DEXA-L product, and we already have those surgeons selected to use that product. Once it comes right off the shelf, we'll be ready to go for them, and they'll have their patients ready to go for us, and they'll consistently use that product. And also, we are in the, before the second quarter is over, we are releasing and trialing our Hydra system, which you've heard me talk about over the last two years. The Hydra system will be out on an alpha phase, and the use of that device, which has been part of the model for the last couple years, is going into new surgeons. The surgeons have been with us, but don't use that style of product with our third-party product, which is the last third-party product we have, which is the German system. we have our own system now that is being put into their hands here by June of this year. They'll be able to start to implant that, and that will count towards new revenue for the company, and we expect that revenue to be an additional over $100,000 a month in new revenue.

Wonderful, wonderful. Well, thank you very much. I really appreciate it there, guys, and continued success. Thank you, Tom.

This is going to be the year that we remember, I assure you. Awesome.

And our next question comes from Lindsey Leeds. Please go ahead with your question.

Hi, Trent and Chad. I want to congratulate you on three consecutive quarters of positive EBIDAC. And thank you for doing the call today. I wanted to ask, you just talked about hydros. Is that just a brand name for the lumbar kit or those two different things?

That is a brand name for the lumbar kit.

Okay. And you have a high degree of confidence that's going to launch in Q2?

Oh, yes. Yeah, I do. In fact, we have most of the build-outs of the kits is here actually in the building. And our manufacturing partner in that device was in our office last week. And we're just now putting the kits together. The accounts, the surgeons that will be using the device are ready when it's ready to be put in their hands. So we're highly confident in that release this quarter.

Okay, awesome. I wanted to ask about your product lines. Which of your product lines is the easiest to sell to a physician who's never used an Aurora product?

That's a good question. I like the question. I think if you're an orthopedic spine surgeon... It's easy for, if you have spying background or if you have spying relationships, it's easy to talk to them about Dexa-C. Dexa-C is a cervical device and the Dexa-C is something that is new to the market. It's relevant to Aurora because of the patent that we were able to achieve on it. We are in a multi-center study with that device right now as we're speaking. It's collecting data, so we're able to not just show features and benefits of that device, but it allows us to show actual clinical data that comes out of that. If you're an orthopedic surgeon, because not a lot of neurosurgeons use SI joint products, I think another product that's really great for the orthopedic market is our Silo TFX system. Because of the superior biomechanics that we are able to produce on that device, we have a paper that's about to be published. It's coming out. Within two weeks, I assume, we signed off on everything on that biomechanical data last week, and it allows the doctor to effectively fuse the SI joint segment of the patient efficiently with lower time in the operating room, less blood loss and superior biomechanics. And I'm talking about superior biomechanics against the leading si joint products that are out there on the market so we're very confident in our biomechanics and we think that's a great door opening product those two devices if you're in the pain market we've we've been able to do two things effectively which was get involved with the pain interventional market from an SI joint fusion standpoint. We started with the silo device, which was the Allograft, and it had gone up and down with some headwinds of coding reimbursement, but it seems like it's settled down. And now we are able to introduce the silo TFX to the interventional pain market, and it has continued to grow. I mean, it's growing tremendously as a product, also efficient in the hospital and the surgery center. And then the second thing that allowed us to really get involved with the interventional market was the need for them to use the Zip device and the Zip 51, which really stood out, as I mentioned in our release. We had a campaign of all of last year, which was, you know, 51 reasons and 52 seasons to use the Zip 51. Now, it sounds like a corny marketing plan, but my marketing plan grew the product 193%. So, yeah. It worked, you know, and we're going to continue to promote on Zip51 because it's a really great door-opening device to be able to go to an interventional doctor and say, what do you currently use to treat L5S1 pain and fusion, and what do you use? And usually they don't have an option because there's not a lot of options out there. We call ourselves the gold standard in L5S1 because we have a great product with a multicenter study that proves that it's effective.

Okay, thank you. With regarding the siloed TFX, the first couple of quarters the product was out, sales were just rocketing forward at a very high percentage. It feels like it's slowed down a bit. Have you hit a wall where you've kind of saturated your early adopters and now the additional growth is harder won, or can you shed any light on that?

You broke up right in the beginning. Was that the silo you said, silo TFX?

Yeah, the TFX, silo TFX.

Yeah, so one year ago, because we released it in April of last year, and when we released it, we had seven kits for the whole country. So we were able to get fast track, get everyone going on the product. We now built out, I think we have 30 kits now available And we had already had many targets out there for our users that had used our silo system, the silo allograft system. So yeah, we were in the queue with them to be able to get more of those usage to, as you put it, saturate that market, more just to get that quick adoption of people who already adopted the technology, the approach, and the surgical technique to be able to apply it to the Dexa, I'm sorry, the silo TFX. So now we're really out grooming new candidates. Our training program for the beginning of the year has been full, and they're really interested in learning about the Zip51 and the Silo TFX. So we didn't get to our 100 units of Silo TFX this last year. We thought we'd get there by December, but we're already over 60 units a month of the silo tfx and i do we will before the end of the year will be over 100 units a month in the silo tfx without a doubt and we already have it in the budget to build additional silo tfx sets as this continues to increase and grow okay excellent thank you um i think it's my last question for now um what kind of milestones might we see in 2024 from your irb studies The IRB studies, you're going to see biomechanical data that's going to come out this year, here in this quarter, on the siloed TFX. So that's going to be out in a press release. You're going to see in July, so the kickoff of 2-3, we're going to release more clinical data on the ZIP device. And then we're going to reset, put out the biomechanics again out in the third quarter. the siloed TFX because we're at a very large, one of the largest pain conferences in the country, so we'll be promoting it there. And then by the time we get to September, we'll start to release the data in anticipation for the North American Spine Society on the DEXA-C cervical data that we have collected on and how the clinical results of that are faring so far, which they're doing great. We have no adverse complications. We have We're able to reduce subsidence. We're able to reduce even pain scores. We're bullish on a faster fusion using DEXA technology in the cervical. So if the data is supporting everything that we set out to accomplish, we just have to keep building off that data and following those patients because it's still early innings, but we couldn't be happier with how the technology is performing, what we have to improve on, And we will this year as we're focused on increasing revenues of that device. And that'll be our part of our big goal is the revenues to come off the DEXA-C. If it's active of a product, we need to sell more of it.

And we will. Okay. Thank you. Our next question comes from Sergio Hyber from Hyber Research.

Please go ahead with your question.

Hi, Trent and Chad. Thank you for taking my questions. Can you talk about the sales staff and how they're paid? Is it tied to – is there an incentive based on the amount of sales?

Yeah, they're paid a – so every person that works for Aurora is an employee of the company. So they're not contractors. They're all employees of the company. And they're paid commissions, and they're paid on growth. So they have to grow. If they're not growing, they don't get paid any extra commission.

And with the increase in sales staff, you should be able to hit that 100 per month goal for TFX very soon. And you talked about having a budget for having more kids. Do you have a timeline for when more kids will be ordered?

I don't have it here in front of me, but yeah, our operations director, she manages those timelines and those build-outs. We make a majority of that product in-house, meaning from the instruments all the way through the implants. The only thing that is outsourced of that device is the trays themselves, the actual holding trays that hold the instruments, and the flex-tip screwdrivers, which are machined in Switzerland. And the screws, which are made by Microcision, which is a manufacturing company that makes a lot of screws for a lot of companies, which is Alpha Tech, Medtronic, you name it. They make a lot of screws for a lot of companies. And they make the screws, the green and the gold screws. But the cones are actually made in our facility, which is the transfixing bridge that goes down the center of the SI joint. So, yes, we have that in the queue. I just don't have the date here in front of me.

Excuse me. Can you talk about the inventory, the amount of inventory? How much is that inventory of DEXA kits?

DEXA kits are 30 kits on the tray. We have enough implants on the shelf for the next, you know, over a year, you know, close to two years with the inventory. Certainly, it's a subject that we're addressing. We're going to hit the ground running really hard every month. We're goal-orientated on getting more DEXA sales out there, and I think the things that we're putting in place right now will start to show that benefit here very soon.

So I'm wondering why you want to come out with a second DEXA product when the first DEXA product sales are kind of stalled out.

Well, DEXA-C is just for cervical, and that product, it was already in a, you know, we started a multicenter study. That's to help sell more of the Apollo plate and the DEXA-C. It's just made for cervical. Historically, we originally had a third-party product for lumbar fusion, which was an anterior lumbar cage. It was a standalone device that went in through the abdominal area, and they fixated it. We third-partied that product. from a company and had over $2 million in annual sales in it. And we saw an increase in that and we were able to acquire our own 510K on that device. It's a 3D printed device. It's called Solo. It's on our website. But we are getting away, now that we know that DEXA-C, at least early stages of the DEXA-C study show that the the the treatment of using the bone density uh implant showing how we 3d print that implant uh is working and working effectively so what we're doing is we're converting the solo system that the products on our website we're converting that into a dexa uh manufacturing phase of the company so essentially we're just eliminating the solo and the solo product will become dexa l so it's a it's a method And what we're trying to do is prove the method of DEXA density bone-driven technology as a platform. So it's going to go through our entire – everything we make that interfaces in between bone will eventually have a DEXA-fied capability to the implant.

Including the TFX?

Including TFX, yes.

So do you still see DEXA being the flagship product for Aurora?

I see it as a platform that absolutely has the ability to be the flagship. The early innings on it are we started in cervical. We're getting great clinical results from that. It's working. We need to sell more of it, but at least the early stages of it, like we rolled out with it, we wanted to make sure it was going to work, and it did. Um, and it continues to work and then we're going to start to integrate it. So one of the first easiest integration, the lowest cost integration to the company was to stop, uh, manufacturing old 3d printed technology, which was the solo style of 3d printing to modify, to change it to the DEXA style of, of, uh, 3d printing, which you can do, which you can order a la carte, right? You don't have to build as much inventory. You can order a la carte. on the densities and the sizes and feather those into your inventory without major impact on your cost center of producing parts.

Thank you. It looks like a really exciting time right now and really the proof will be in the sales and you're all geared up with the extra with the additional sales staff that you added So I'm really excited about the coming year as you present it. And I want to piggyback on what Tom said. I haven't written articles on Seeking Alpha. I have a lot of people complaining about the lack of up-to-date investor deck and the lack of news put out that there's more news on social media than there is coming out directly to investors. And When the stock price declines, everybody's looking for a reason why, and they'll pick on anything that can be criticized. And the only thing I can criticize, Aurora, is on the lack of investor engagement other than social media.

I take the criticism to heart. I hear you loud and clear, and I hear other investors. It doesn't go unnoticed. We'll do a better job. We're going to do a better job This year and immediately, we're already making strides. I think, obviously, there's a lot of social media, but that was part of a campaign that we chose internally that we wanted to have more of a presence out there across the board. You know, we can certainly measure it now. We can show that what we did last year, we took one device in particular, which was Zip 51 and measured it. And, you know, the results spoke for themselves. And as part of that, is that we saw sales growth, we saw higher margins, we saw the increase of the Zip 51, which was the targeted product. And we're going to continue to target that product because we're only scratching the surface of its potential. And then we'll be able to continue that type of momentum with Silo TFX sales growth and sales success. And then behind the scenes, because you're a shareholder, you follow the story. You know that we're working on the decks of technology because that's something that we can still build off a platform on it. But to your point, we've got to get more press releases out there. That was one of Tom's points. We're going to get more press releases out there so it's more of a broader approach and not just a social media approach. And we'll make sure that we're better communicators on our website. Chad is taking that one to heart in particular. We are going to update our financial system. page on our website, and it's going to be much better. We'll get through that through this quarter, but by July, you're going to see major improvements on the financial section of our website, and you will absolutely feel a stronger presence in the press releases going forward, I assure you.

Thank you, Charlie. My last question is about getting a brand recognition for Destin so that In the future, you can license it and spread to other types of devices beyond spine. And you had talked about working with hospitals. So as you were aware, because I texted you a question that I got a crazy result from AI showing that you already had duct cell pain centers. But is that still... In the plan, and I apologize for that. No, no, it was great. It was really great. I know exactly what you're talking about.

Yeah, I know.

I was like, wow.

I wish it was true, but it was not. Yeah, so one of the things that we did early on with DEXA, if you remember, if you go look at old press releases, there was a group out of Italy that was attempting to come into the U.S. market called Echolite. And what's unique about it is that the aging population – is for sure taking, you know, a lot of them are healthier than ever. Some are less healthy than they were. But, you know, my dad's in his 70s and rides his bike and walks around. My mom, you know, gets around. Everyone's trying to stay, you know, longevity, life. And your bone density and your bone health is one of those important factors. And all these implants that are made by everyone else but Aurora is one density driven only. It's only meant for really one density of implant, which is whatever the density of that patient has. And so that implant is one rigid piece of material, either a polymer or a piece of metal. In our opinion, it's just simply too hard. It's just way too hard of material. You're making the body work extra hard. When you have the ability, the technology is here with us today. We are premiering that and studying that so we have some data to prove it. It won't just be a marketing piece. It'll actually be a scientific piece, a clinical piece. But the point was is that Echolite, which is trying to expand into the market, And other companies like Butterfly and, of course, big companies like GE Imaging, they're all very driven towards bone density. There's just never been an implant for it until now. There's medications, there's pharmaceuticals, but that's not the market we're in. We're into the market of implants interacting between the patient's bone. We want to have an implant that best suits their bone density. And Echolite recently got their funding back. They're back in the U.S. We had a conference call with them. About a month ago, maybe a month and a half ago, our chief technology officer is meeting with them in Dallas, I think next week, and we're going to start to expand this because what we think is going to happen is Echolite will get a code for their own reimbursements into doctors' offices where they can expand on their own billing. When a patient walks in, they can get a phone scan, which exists currently, but they're expanding on it. They can go in there, and then now the doctor can go you know, you're at a, you know, you know, minus, uh, 2.5. Uh, I think we got to consider using that, that DEXA cage from Aurora spine, because I can't use the one from, you know, Medtronic or striker because they don't have anything like that. And that'll start to penetrate. They're doing their own market, uh, penetration echo light. And we have a national agreement, uh, with them in the U S and then of course, Aurora has got a clinical study going, showing the DEXA C. And as that data starts to come out, we'll be able to release it, because you can't release it until it's actual data. We'll be able to put it out into the market, and then those surgeons can actually analyze that data, critique it, and know that they actually have an option for the product. So it's going to come down to marketing, branding it, and, of course, getting the real clinical data to support it, because it has to be real and not just a marketing piece.

That's very exciting. That's something to look forward to. Is there other products that you are planning to introduce in 2024?

There's some things that we've identified. We do have a device that's with the FDA for approval. We're not talking about it at this point in time, but we're in the queue with the FDA with the FDA on a device. And we have a lot of the R&D stuff, but it's all stuff that we're just building around for patent submissions. We have some other patents that are submitted that we're waiting for approval back to the company. We can't talk about it yet because it's not approved yet from a patent standpoint. And the devices with the FDA is not 510K'd yet. But the device that is 510K'd that we're going to come out with here in Q2, which Leslie talked to, asked a question, sorry, Lindsay, excuse me, asked a question about was the Hydra system, which is coming out here by June, and we'll start to implant that. That's a long story for you, because you've been carrying the story for a while, that when is the Hydra going to come out? Well, it's coming out in June.

Thank you. That's all my questions. Thank you, Trent and Chad.

Thank you, Sergio.

Once again, if you would like to ask a question, please press star and one. Our next question is a follow-up from Tom Petition from Microcap Connection. Please go ahead with your follow-up.

Hey, guys. Follow-up question on the siloed TFX. How many kits do you have out there today? And I know in the past we spoke about you guys wanting to get doctors to the point of maybe doing two to two and a half surgeries per month. What are we looking at today and what is it going to take to kind of get it to those levels?

Yeah, turn rates are, I think if I have it right, are running about 1.6 turn rates. So we're getting close to that 2.0 turn rate, which was that first, you know, obviously you get past one, you know, and then you get the number much higher. Chad, correct me if I'm wrong, but I think we have 30 kits now of siloed TFX. Is that right?

Yeah, approximately 30.

Approximately 30, and then we put in the budget for last year when we were building the 2024 budget, we put in there triggers if we started to see the continued growth, what would it look like, and then how many more kits would we build out. And again, we control a lot of that. It's not a matter of we've got to outsource all this to some other vendor and wait until know 24 weeks for the product to be released it's something we can make quickly if you will something we could make in eight weeks um or better and uh we have in the budget uh 20 more kits that are that's in the budget but it's not we haven't we haven't started making those kits yet it's just in the budget okay and and and the last question is more in um more about the

the pay that you're getting back for reimbursement for siloed TFX, and even for that matter, for the zip. I believe when the new code came in, of course, there was a lot of confusion, and I think our price, going back on memory, was somewhere around $13,000 for the TFX, but was increased, or you guys decided to increase it thereafter. Have the prices remained, you know, stable or have you increased prices across the board? How does that look from that perspective?

So it's in pockets. Certain areas are higher than others. As you know, we got on the DOD contract. We're not allowed to make a press release on that. They don't allow you to do press releases on that. But we're on the DOD contract now. Their pricing is much different than the national average. We, we, certain areas, we, we saw the price softening in certain areas, but still very strong. And we're talking about, you know, over nine grand, you know, 10 grand a unit from say 12, $13,000. But, uh, we're not, we're not irked by that. We don't love it, but we're not irked by it. Um, we're always looking for volume. Uh, one of the things that is, we'll see where it lands. It's softened on the silo because in the first half of last year, You know, we did $472,000 in the silo allograft, but only because we only released at the end of March the silo TFX, which we did a little over $128,000 in that device. So it was a $600,000 quarter. But that leaked fast, you know, quickly to the next quarter, which was Q2, which the units went up. where we did over 400,000 again in the Allograft, but then we did 380,000 in the TFX. Now, the headwinds got really crazy with the silo Allograft system, again, with all companies, not just Aurora. So the sales really tapered off in the Allograft market across the board for everyone in Allograft. So it went down to a much lower level, but we were able to just below $200,000 from $400,000. But we were able to pick all that back up because in Q3 we did well over a million dollars in TFX and we increased in that in Q4. So we did, you know, we did $1.2 million in Q3 in total in the SI joint space. And then in Q4, we did $1.3 million in the SI joint space. And then we saw an increase in the beginning of Q1 of this year that the allograft went over to, you know, went up and over 200,000. So it allowed us, so if you look at the quarters, Q1, we did $600,000 in SI. Q2, we did almost $800,000 in SI. In Q3 of 2023, we did over 1.2. In Q4, we did over 1.3. And in Q1 of this year, we did over 1.4. So we have five consecutive quarters of the SI joint market increasing for us. And as far as the average goes, we're already ahead of that average in Q2 2024. Wonderful.

As for the VA surgeries, are you performing surgeries with Veteran Affairs right now?

We've done a couple. Yeah, we've done a couple. I can't tell you what the price is, but it's It's impressive. We're working with a national, just have an agreement with a national distribution network that works within the military system. They only distribute products in the military. That's what they do. There's two different groups, but one of them in particular we're close with. We think the second half of the year that could be really good for us. We don't know what those numbers will look like, but we know what the potential is. Then there's another group that we actually have a real close relationship with that their CEO is military based. So the whole company is military based and we're trying to work that angle as well. So these are things that we're focused on in-house. We have to get across the finish line, but we can do it. If we did it, then it's a big mark for us. And we've already done some cases in the military and they've gone really, really well. And I think I put a post out just recently. We did a full training at Navy Balboa in San Diego. We had 12 military doctors in there, ortho and pain, and they all put in ZIP and siloed TFX, and it went perfectly. The whole lab was perfect.

Wonderful, wonderful. Last question I have is, what sort of metrics should we follow or ask moving forward as we go through 2024? Is there anything that really you think we should be focusing on this year?

Yeah, it's the Core 3 product. You've got to keep asking me questions on DEXA. I'm not scared away from that. You guys can keep coming at me on that. We have to do a better job improving those DEXA cells, and we will. Silo TFX, the momentum is there. The results are there, man. I mean, these patients are getting better. The ZIF, we're going to continue to push on that. And if we get more spine people involved, we think we can get, because we have clinical data now that was collaborative with ortho, neuro, and pain, now we can look an orthopedist in the eye and say, look, I know you've been an anti-interlamina fusion doctor because you use screws all the time, but you can't argue this data. It's got less blood loss, shorter operating room time, and a pain reduction score that's way better than traditional lumbar fusion. And this is good. You get paid the same. So why don't you take a closer look at it? And why don't you take a look at Zip 51, you know, orthopedic one, orthopedic two, neurosurgeon three, four. That'll be part of this conversation as we add more regional coverage, people who have a spine background. I do think that we'll continue to see success in the Zip device. in the coming years. And then the DEXA-C, back to that real quick, the DEXA-C will be supported because we'll see, we'll have more of the kits coming out for Apollo. Apollo only has nine kits, which is our cervical plate. And you got to use a plate with the DEXA-C cage. So more of those Apollo trays are being built up. And I don't have the timeline on that in front of me, but it'll help support those sales and that sales activity.

Wonderful, wonderful. Well, thank you again, guys. Much appreciated, and continued success.

And the last one, you can also hold the metrics of did you add more salespeople as you said you're going to. Like I said, we are one headcount down, but we already think we're going to get two steps ahead of that. So you can come back to me again. You guys can call me anytime. You know that. We're working on all the corners of the U.S., and we're going to get more people in those areas.

That's going to increase the revenues and continue to beat our quarters every year. Wonderful. Thank you, guys.

And ladies and gentlemen, that will conclude today's question and answer session. I'd like to turn the floor back over to management for any closing remarks.

Thank you for joining us today. We appreciate your time and interest in Aurora Spine. And we are very excited about what's ahead of us in 2024 and beyond. We look forward to speaking with many of you in the weeks ahead. If you have any questions, please reach out to us at Aurora Spine. Many of you know how to get a hold of me, so continue to do that. And thanks again, everyone. Have a great rest of your day.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.