Aurora Spine Corporation (ASG) Earnings Call Transcript & Summary

Hello and welcome to the Aurora Spine Second Quarter Fiscal Year 2023 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Adam Lowensteiner. Please go ahead.

Thank you, MJ. Welcome, everyone, and thank you for joining us today to conduct an update with investors and review the financial results for Aurora Spine for the second quarter fiscal 2023 ended June 30, 2023. With us on the call representing the company today are Trent Northcutt, President and CEO of Aurora Spine; and Chad Clouse, Chief Financial Officer of Aurora Spine. Before we begin, I'd like to remind everyone that statements made during the 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 risks and uncertainties and other important factors that could cause actual performance or achievements to be materially different from those projected. For a full discussion of these risks, uncertainties and factors, you are encouraged to read Aurora Spine's documents on file with SEDAR, including those set forth in periodic reports filed under the Forward-looking statements and Risk Factors section. Aurora Spine does not intend to update any -- or revise any forward-looking statements, whether a result of new information, future events or otherwise. On this call, management may refer to EBITDAC, adjusted EBITDAC, adjusted net income, adjusted EPS, which are not measures of financial performance under generally except 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 CEO of Aurora Spine, Trent, please proceed.

Thank you, Adam. I'd like to welcome everyone to this call to update everyone about Aurora Spine. First off, I do apologize for the delay in having this call, but I've been out on the road meeting with doctors and surgeons and working towards developing this business further. To lay out the agenda for today's call, I'd like to take a different approach and focus on a few topics to update investors as what we are working on at Aurora Spine. After those remarks, Chad and I will be happy to answer any questions you may have. Topics to cover. Number one, SiLO TFX. It is selling and doing well and is given the limited amount of kits in the field, but these limited amount of kits have really performed well. So a, it is selling, and it is doing well; b, more kits are underway. So we're going to have a more robust build-out on this product line; c, plans for development of those kits is underway. Number two, ZIP. ZIP saw a 33% increase year-over-year; b, continues to be the workhorse for Aurora; c, we're seeing growth due to picking up in new accounts based upon the trainings that we performed. In-house sales team, this is really key. Working on building internal sales team. That's been our #1; a, focus on the in-house sales team; b, we will be between 8 and 12, and we've already added -- we have over 5 now people in the field working towards development, and we're going to add probably up 7 additional by March of next year. We believe this is needed for the growth of the company to build a stronger relationship with the customers. Number four, update up on DEXA technology, where we are having the first patient enrolled in the multicenter study is key. Number five, the company's financial structure. Q2 was a step in the right direction, getting back on track to where we were in the previous year. The balance sheet is a bit tighter than you'd probably like, but we're working on bridging that financing and getting better sorting out of that financing. Profitability is now within grasp, and we really are moving in that direction. And six, we just want you to know that this is the time for Aurora to grow. To summarize, I'm extremely proud of our team's performance and staying focused on building this team. We are well positioned to take advantage of the growing markets with several new proprietary products. We remain focused on penetrating these markets further this year as we continue the training sessions and the clinical trials. Looking on to longer term, we are well positioned for success, especially as we have these new products and more clinical studies proving out our technologies and education more doctors on the benefits of using the Aurora products. We remain highly focused on this opportunity that's in front of us, and we'll continue to invest in our growth and with each of our new major platforms such as ZIP, SiLO and DEXA. With that said, operator, we are ready for any questions.

[Operator Instructions] Today's first question comes from Tom Fedichin with Microcap Connection.

Congratulations on a great quarter. It's nice to see it's trending -- sales are trending in the right direction. I'd like to ask a few questions, and we'll start off with the TFX. And by the way, I don't want to hog the call. So feel free to move on. I can come back and carry on with my questions as I've got a long list. But -- so maybe we'll start off with TFX. 10.6% of all sales were related to the TFX. This equates roughly to around $360,000 or in other words, 30 TFX sales during Q2. $12,000 per device is how I've come up with this conclusion. During your last call, you felt Q3, you were anticipating sales of 25 to 35 implants per month. Do you feel that you'll be able to hit this target moving forward in Q3?

Yes. Thank you, Tom, for especially paying attention to the details, because the detail is important in this case. We've been talking about SiLO TFX for a long time. I'm proud to say and super excited to say that not only on the limited release of the inventory that we put out just to get the alpha phase underway, that we are meeting and exceeding our unit counts that we were working on. The turn rates have been stupendous. I really got to take my team from the field all the way into the office, where we were turning these sets and getting them moved around all over the country. Matt Goldstone, who's our new Chief Business Officer, who came in the beginning of this year, has worked well with the field, management team, the warehousing, the customer service. And [indiscernible], she's just been all over this inventory, making sure this is going well. Our manufacturing -- the Head of Manufacturing, [indiscernible], over at the machine shop where we made virtually every instrument in-house for the TFX is precise. It's been precision-made, it's beautiful. The implants are beautiful. And the procedure is going very well, where the doctors are able to get this product in the patient quickly, effectively, and most importantly, is having a direct impact on that patient. The patients are walking in and walking out the same day. We're very, very proud of this. And this is all part of the training programs that we put together. The designing of the products, the engineering, the manufacturing and just pulling together as a team on a project that was very hard, very difficult, but it has certainly seen a very bright spot in the light right now, and we couldn't be happier about it. And so yes -- the answer to your question would have been yes, we're getting to those numbers.

And to carry on that -- on the theme of TFX, so the kits, I understand there are 7 kits currently out in the field. Is that correct?

Yes.

Okay. And I heard, I didn't hear this firsthand, that there are 30 kits that have been ordered. Is that correct? So we'll see some time in September -- maybe you can speak to if it's early September, mid- or late September when the 30 kits will have arrived.

Yes. So 2 parts to that. First part is, yes. We ordered an additional -- we had 7 in the field. We ordered -- we had an additional 23 sets that are coming in, which will give us a total of 30, plus we added some extra kits for training purposes. That way, we could have a kit out at a cadaver lab or at a course and not pull inventory from the field to go teach that course. So we have some extra additional kits. And these are actual true surgical kits. So if we had to in a pinch pull a training kit into surgery, we would do that. That's part one. Part two is we are already identifying build-outs for additional kits because we feel as though as long as things continue to progress as we have seen so far, that we'll -- more kits will be needed, which is a good problem to have.

And the cost for a kit, is it $12,000? I heard somebody posted -- or maybe that's the pricing. They just confused it. Well, how much does it cost per kit?

Chad, what's the estimated cost on that again?

I'd say, $8,000 to $9,000.

$8,000 to $9,000, okay. And you're still getting rewarded $12,000 per implant? The pricing has remained solid, no discounting?

Yes. I'll answer it this way. The pricing has been north of $9,000 per unit, but as high as $20,000 per unit. Most recently, we actually got accepted onto the DoD contract. So that's a different price point. That's based on government pricing, which is higher. And we're proud of that effort. So we're officially on that contract, and we're working towards those different military NDA accounts around the country as we speak.

Wonderful. Congratulations. That's awesome.

Thank you.

Can you speak to the SiLO sales? I understand last year, Q4, we saw 70% decline in the legacy SiLO implant. And of course, we saw in Q1 a rebound. And I assumed, and again, just my assumption, so it wasn't written in any press release, that sales were probably around 50% of what they were a year ago. Is that pretty accurate? Is that kind of what you're seeing today for the legacy SiLO product? Or is it better?

Quick -- go ahead, Chad. Go ahead.

Yes, I've got that one. You're right, Tom, that's about 50%.

Okay, okay. Perfect, perfect. Okay. I'll step aside. I know others have questions. I have a list of questions, so I don't want to hog the call. So I'll step aside, let others ask and come back to you guys.

Yes, I want to come -- I want to give you some more color on that. So yes, please come back to another question, Tom, yes.

The next question comes from Lindsay Lee, a private investor.

Congratulations on a really great rebound quarter from Q1. I'm just really excited to see your progress in Q2. I wanted to ask about the order-to-cash cycle. From the time a surgeon does a surgery, how long would it take for you to be able to collect on that money typically? I know there's going to be some variation, but just a guesstimate on that.

Yes, it's a good question. It varies, of course, from account to account, hospital system to hospital system. But our terms are typically between 35 to 45 days to get the PO number back off the invoice from that hospital. But some hospitals are 60 days-plus, some hospitals are 90 days-plus. So those are real. And some hospitals are -- can be worse than that. But typically, all -- majority of our good payers, hospitalizes, are all between 30 and 60 days.

Okay. Excellent. And I'd like you to talk a little bit about your sales strategy. I've heard you've been using distributors. So I'm wondering -- are the new salespeople you're hiring, are they replacing distributors? Or are you keeping those distributors as well? Can you share a little bit about that, please?

Yes. We are adding some direct representation in areas that we do not have strong distribution in. And the key thing about some of the products that we have been working on for the last 5 years was we wanted to have a portfolio that would really attract not only just the surgeons, the doctors, but also distributors that do not have this product in their bag. So our key distributors that we have currently, we really embrace and appreciate them. And then our -- the ones that are out there that are now taking a look -- closer look at Aurora because of announcements and because of coding and reimbursement headwinds that happened last year going into -- even into this year, we feel like we now have the portfolio that will attract new distributors. But where we would need to go direct, we will in those areas. It might just be faster for us to go direct into certain locations because there's not a distributor there that we can access or rely on. So it will be a blend. Mostly, we'll still be in independent distribution because it's a broader net that we can cast with that distribution. That is part of our sales strategy.

Okay. Awesome. In the SEDAR filings, it looks like there were some supply chain issues in Q2. And I'm wondering, are those fully resolved? And were there any downstream effects on SiLO, DEXA, ZIP as far as the supply chain issues go?

Yes. So I would like to believe that we weren't the only one affected by supply chain headwinds that happened with a lot of different sectors of the market. But in our particular sector, one of the issues was 3M was manufacturing the lid that go on to our containers that hold the implant as we sterilize them. And they were backordered, and that was just one of the issue, had nothing to do with us, but it was a supply chain. It's gotten better. It's springing up some more. They made more lids, if you will, for everybody. And it was a material that's used for all sterile products around the globe. So it was a big global backorder issue. But it seems like it's gotten better. Also, Roba Materials seems to be more readily accessible to us. So we feel good about the Roba Materials that we're getting such as titanium, stainless steel. And also, we use our own material called, Radel, which is a radiolucent material that x-ray [indiscernible]. And that had no backorder issues, but we were able to get that more readily. And that's part of the key build-out in our TFX system we use that, not only did we -- surgical kits are typically metal trays that are used over and over again to be processed in the hospital or surgery center. We were able to use Radel as a polymer to make our surgical kits out of Radel. And we are also using the Radel in national instruments themselves. So it was a nice pivot, and I give credit to our engineering and manufacturing team for recognizing this. And that helped us build our kits off faster for TFX. In fact, all the TFX kits are made out of a polymer versus a metal. So it's unique and it's really helpful for us.

Were there any -- you said there was some effect on SiLO TFX. Did it bottleneck you at all on SiLO or DEXA?

It did. It -- the lids from 3M bottlenecked us in DEXA-C, which we got through that. And then as far as getting metal instrument trays made, we did the pivot and made those out of Radel. So we were able to expedite that process and speed it up. So we're pleased with it, and it's performing well. In fact, all 30 of the kits that I mentioned for TFX, they're all made out of Radel.

Okay. For the SiLO TFX kits, what's your level of confidence that they'll be shipped in, say, September?

My confidence is 99.9%. So I'll leave 1 little small percentage there just in case there's something I don't see, but I'm super confident that all those kits are coming out before September is over. And we have homes for them already in the field.

Our next question is a follow-up from Tom Fedichin.

You just answered my question about the 30 kits and the full 36 -- 30 kits, I should say. So you found homes for them already. So -- obviously, that means you've trained the doctors already. There's no handholding. You send them on out, and they can start to implant them, provide surgeries immediately?

Yes. Instead of us -- we actually missed some surgeries because we were lacking inventory. Trades themselves, not the inventory. We had the inventory, but just not the kits. So we had to bounce them from one location to another. So we're talking trains, planes, automobiles, people jump on planes and self personally fly them and handing them over to the distributor, get them in surgery. Really got to praise the team for getting out there. And we're setting all-time records for us internally for turn rates with TFX. The demand is there. And I know you didn't ask the question, but it's -- you've been part of the conversation for a long time, Tom, is that the coding and reimbursement -- 5 years ago when we started making TFX, we weren't worried about the coding reimbursement because there was only one code and one reimbursement that was being used. That all changed over 5 years. And the demand is there for TFX, because we met the code requirements just by goodwill because we were already working on a system that was a direct competitor with some of the biggest companies out there in SI space. But we really felt like we did it more clear and made the product on its own merits without being focused just on the codes and reimbursements that were there on the biomechanics and the safety and efficacy of the product for the patient.

Wonderful. No, that's fantastic news. Now what sort of turn rate do you expect per doctor per kit? So if 30 kits were in the field, is it safe to say 3 surgeries a month, like that's 1 every -- not even 1 a week? Is that a safe assumption?

Yes, we're going to -- we're taking the existing 30 -- call it, 30 kits, and we're putting it out there as our first step forward once they go out to the -- once they get released out in the field, our first step forward is to get no less than 2 turns. So that's about 60 implants, right, if you run the math there. And of course, we already know that we're doing more than that with the 7 kits. But 3 is a great measuring stick for us, and we think it's going to be north of 3, but we're starting with 2, and then we're working towards 3 and then -- and so forth. And if -- we're already identifying if we're getting north of 4 per kit, then -- obviously, we're going to park those sets there, like not to digress here, but one of the accounts that Matthew Goldstone brought up to us even this morning was they have over 10 cases on the schedule already in 1 month. So I'd rather not fly a bunch of trays around. I like to just leave them 1 or 2 kits right there, because they're going to do 10, there's 5 turns right there per kit. And so that's the kind of turn rates, I think we can get to in a short period of time.

Impressive. Very impressive. Can you -- you mentioned Matthew Goldstone, and I've heard as they mentioned, Adam Lowensteiner has really given some really glowing remarks about Matt. Can you speak about how Matt has kind of changed the face of your company when he's -- since he's been brought in and how he's attracted some individuals? I say this because I saw Stephen -- or Steve Sharkey was brought in, he was hired. He saw us posting on LinkedIn, and he looks at quite the hire. So maybe you can speak to both Rob Sharkey -- or pardon me, Steve Sharkey, I should say, and then maybe Matt as well.

So definitely, Matt Goldstone had a direct impact. And it really stems back from adding -- there was a process. First, we added Blake Harbor, who came in and really embraced our pain interventional concept that we were talking about with the multi-site study for ZIP and for TFX and the future TFX and, of course, SiLO. These things came into place. And then Matt Paxton joined us from Medtronic. He came in and was in direct -- he's an impact for us. I got to give credit to those 2 gentlemen who really hit the ground running right away, which really set the table for me to -- I made a change in sales leadership last year, as everyone knows. And Matt and I have crossed paths but didn't really know each other as well. And we met and we discussed the philosophy of the company. And with his sales leadership, looks like, his business strategies, and it was in line with mine. And I was -- I couldn't have been more pleased. He was pleased. He lives here in San Diego, which made it easy versus having somebody else across the country. I even emptied out the other half of my office. So he now sits across from me. And we can strategize on where we're going. We got the maps up on the walls, and it's full steam ahead. So he added Katelyn Sims right away. We were in discussions with Katelyn. Matt coming on board sealed the deal. She came in, and she was the fastest-growing regional sales director in our company ever. So she hit sales revenues faster than any other salesperson, and she's probably lead the way for quite some time. And adding somebody like Katelyn and Matt Goldstone and Paxton and Blake led us right to the path of given Steve Sharkey onboard, another highly talented guy, someone who's really buttoned-up structure-wise, business-wise. And I think you're going to see more of that. I don't want to downplay Steve Sharkey, because he's a super good person, number one; and number two, he's got the right business sense in his head and in his career that he is respected amongst his peers and he works with in the areas and across the industry. So Steve's a great hire for us, and Matt Goldstone has several other people that we have in the queue. Offers have been made out to other people that we think a lot of, highly of. And we are looking to possibly add up to 7 new people as such up until March of next year. That's kind of what we're identifying right now in regions such as the Southeast and Northeast and additional areas in the Midwest and the upper Northwest.

Fantastic. That's huge. Maybe we can switch gears just a little bit and speak now about the ZIP. You've mentioned it being the workhorse of your company. And can you -- and I guess the sales were up 32% as well, I see. Will this growth continue? Will it improve? Or are you expecting it just to stay at these levels moving forward for the foreseeable future? Have we -- yes, I'll let you answer.

Yes. We're on a -- we're having fun with it. We just came back from a big conference in Miami, the ASPN conference. It was one of the best conferences I've ever attended in over 20 years. The passion, the fire in people's bellies, the conversations that were there was real. And over 3,000 registered surgeons and doctors of this meaning. We're talking -- that's the same kind of numbers as -- even larger than NASS, right? It's a very large amount of people. It was packed. And the conversation that got us to that meeting all started because of a couple of years ago, we started on this multicenter for the ZIP product. The ZIP opened the doors for us to get involved there. And we are in the middle of a campaign called the 51 weeks of ZIP 51. There's a real need and opportunity for us to grow more ZIP sales with our ZIP L5-S1 product, the ZIP 51, because there's not a lot of options out there for ZIP L5-S1. And the -- and these pain surgeons are really looking closer at this device because they were all trained on the regular ZIP and -- which led us into showing them SiLO and now SiLO TFX. But now we're saying, look, take a look at our ZIP 51. We are a gold standard for L5-S1 fixation infusion. It's hard even to get screws down there sometimes. It's a small area, low down -- as far as down in your back as you can go. And our ZIP 51 has impressive biomechanics, and it's a real great screwless alternative for patients and for the doctors who take care of those patients.

Wonderful. No, that's awesome. Obviously, sales are going well. It's great to see. It's a big part of your company. So that's definitely great to hear it's going to continue. Let's move on to DEXA-C. How are sales going? Are you facing the same hurdles you had before with getting into hospitals, getting approval?

Not so much in the headwinds of the hospitals anymore. It's been more of getting the attention of the customers that already have, say, legacy products, such as Peak or another 3D-printed implant in trying to compare the DEXA to those devices. It takes some salesmen, saleswomanship to get out there and talk to the accounts about this. We have some early adopters, and we still have those adopters still use the products. We have more people using the products. The numbers have certainly come down a little bit, but it's not due to lack of effort. It's just -- it's going to be a little bit of a growth curve. It didn't happen as fast as I originally had predicted. I thought we were going to build to hit the ground a lot harder. But we've made steps to get more awareness. And what we did was we got our IRB approval for the multicenter study for the cervical, which has begun. We got our first patients enrolled on it. And that directly ties to what we did 2 years ago when we were talking about ZIP, right? ZIP was not a product that was high on the revenue side for us. We had to go reintroduce it to get more customers to take closer look at it. We got an IRB approval. We started the multicenter study. We got the ZIP into more doctors' hands. And we had some information that's coming out of doctors we're talking about, because there were more users of the product. And in these discussions, that's exactly what I needed for ZIP to take off, and that's exactly what I'm doing with DEXA. I'm getting it more -- into more hands of people so we can talk about it, more posting of the information online. We have to educate the medical -- the surgeons have options, and they're also creatures of habit. They get really great clinical results with a lot of products that they currently use. We have to show them there is a benefit here to switching from another cervical device to our cervical device as part of the platform build-out of our product. So I'm still very bullish on DEXA. Obviously, the numbers have to improve, and they will. We are making some strides on that. And talking to even larger distribution companies out there that could take this on and really focus on this as a product in their portfolio, why I have a lot of salespeople focusing on, say, TFX and ZIP sales. So I'm working on some strategies on that, that I think will be key for us to get DEXA. DEXA is still very near and dear to me.

Okay. Would you say that the DEXA line has kind of taken a little bit of a backseat as SiLO -- let's be honest, if SiLO is selling or the TFX is selling, you focus on what's selling. You put all your efforts there, and you try to move into profitability. And DEXA takes a little bit of a backseat, and the time will come when you get more focused. Is that the kind of the strategy? Or are you still equally giving -- both the equal amount of attention?

Well, obviously, everything is new. The shinier thing always seems to get pulled out of the bag first. But what is key is that what we noticed that happened, and I know I mentioned this to you before was, we used to be very heavy top-sided hospital business versus surgery center business. And what I like about the portfolio is that Aurora has this portfolio that has now -- has been a slow burn for 5 years of coming together. But with the Apollo cervical plate, getting everything worked out there, the DEXA now being all built up the way we wanted it to be, the TFX coming off of its R&D into its alpha phase now being released as a full product, SiLO seeing some breath of life again because of the coding reimbursement changes, a lot of these interventional physicians and, of course, ortho and neuro doctors, own surgery centers. That's something that we see more and more popping up across the country. And the DEXA fits nicely in that portfolio, because it's a prepackaged sterile implant, can sit on the shelf and wait for the next cervical to come along. And there's over 300,000 cervical procedures performed annually. And we think that we have the best-in-class cervical option. We just need to get more people to be aware of it. So our business people that are out there talking about TFX, they have the appointment or they talk about SiLO they have a point or talking about ZIP, they're in front of that customer and the question is, hey, Dr. Debbie or Dr. John, do you have a surgery center that you're working at? And do you have orthopedic and neurosurgeons working at your surgery centers? I'd like to talk to you about DEXA. So it is part of their sales presentation, their business presentation because it's right there available to them. But certainly, what's new is to mostly talking about right now. TFX is high in everyone's mind.

Of course, yes. As for DEXA kits in the field, how many kits are currently in the field today?

Okay. That's a good question. I don't know off the top of my head. I know -- Chad, do you have that number for me?

Gosh, No. Let me -- I'll find it.

We can come back to that, and I can ask some other questions in the meantime. So doctor training, what's the plans for doctor training? With the growth of SiLO TFX and ZIP has taken off, it appears that profitabilities within sight as mentioned. Will doctor training start to pick back up again?

Yes. There's -- there -- we decided on national levels that the national labs were not as effective as regional labs, so focused more on regional get togethers and locations that we could -- for doctors in that area could drive over to the lab and sort of get on a plane and fly into it. It wasn't -- and certainly, we're always watching costs because we're trying to be profitable as a company. But the effectiveness, the closing ROI rate was better to be regional. There's a conference that we have that we're calling train the trainers next month when we have 22 very high-level people coming -- the doctors and surgeons coming in to this conference -- at our conference to train the trainers. This is all part of our preparation and planning for what we think can be a very successful 2024 campaign. I'm impressed with what Matt Goldstone has assembled for this conference for us next week. The roster of these attendees is top-shelf. So these people will be talking about trainees, talking -- and these are top leaders, podium speakers. These are people who roll up their sleeves and actually use the products. And they'll be -- they're going to be our evangelists, right? They're going to be the ones out there talking about their good clinical results because we believe we're going to have very strong results all through 2024.

Wonderful. And...

33 DEXA kits.

Okay. And that was in the field?

21 of them are in the field right now being used currently. And there's, whatever the difference is, is in-house right now waiting to go out.

Wonderful. And where was it going -- as for breakeven profitability, obviously, more sales staff have been brought on and are planned to be brought in moving forward. What's the breakeven today? Is it $1.3 million? I think you had mentioned maybe $1.2 million last quarter, but we saw of course, $3.6 million. And we -- I think it was a $400,000 loss, right? So I'm guessing, is it closer to $1.3 million per month right now for breakeven?

It is. It went up a hair. But the sales are pointing in an upward direction, which, obviously, we have to keep doing the work to get there. But the -- yes, breakeven is, call it, $1.3 million, $1.32 million. And then as we add more people, we'll have to edge that up a little bit. But our -- the sales team is focused on the $1.5 million a month. That's where we are first -- that's where we want to have our minimums at, and we're getting close to that.

Wonderful. That's great to hear. Congratulations. Now Q3, do you think there's a chance of breakeven?

I do, I do.

Wonderful. Again, congratulations. You guys are doing a great job.

I do with confidence. Yes, I do with confidence. I think that it's -- as you know, Tom, there's been a lot of heavy lifting going on here. And we've embraced the challenge, and the team is really, really focused. And there's more people joining our team. It's going to take more people, right? We can't do it as light as we probably were trying to do it. So more head counts, more Sharkeys, more Katelyns, more Goldstones and beyond. We're going to build off of that. And that will also really help us pick up that number. First, we want to cross the profitability line. That's our #1 focus, right? I was getting the products out, but did not become profitable. So that's our #1 goal. And then from profitability is to hit that next target number, which is our minimum. We want it to be $1.5 million. And once we hit $1.5 million, we'll set the new marker, what we want to hit, but profitability has got to come first.

Yes, of course. My eyes have been set on Q4. So it's great to hear that Q3 for breakeven, that would be huge. So again, that's -- congratulations. It's great to see. A question now on the cash in the company. You had mentioned it is tighter than you would like. You had mentioned about bridging. Maybe you can speak a bit about this and what you mean, what the plans are for shoring up funds to allow for this expected growth.

Yes. I am in the process of working on bridging type of financing internally. I'm not talking externally at all. So I'm keeping everything in-house right now. We're discussing some options and things that we can do. We're going to -- nothing's ever 100%, but I'm working to get that done and wrapped up here right away, so I can be able to make some announcements on that soon.

Okay. And maybe you can speak about future plans. Like in my opinion, the TFX venture has probably, so did you fine to get to this point. But at some point, you probably will be looking at delisting, and a company that's profitable listed on the NASDAQ is going to give you a much better valuation than, say, in Canada. Do you foresee something like this taking place in 2024?

Number one, I love all my brothers and sisters in Canada, so we're really grateful for the time that we've been on TFX. But I do agree with you. I think it's a U.S. story that has been really well supported over the years with our Canadian listing. But we got to get some more of the masses, and we got to get that stock price up, for sure. And we need to have a way for that stock price to truly be -- to be in front of more people and to have more people take a closer look at it, really. So I do still mean towards doing an uplist on to the NASDAQ when the time is right. I've been talking about this for a while, so there's been times I've been wanting to do this in earlier stages. But obviously, you're not going to do it when you're not profitable and not heading in an upward direction. And there is a lot of variables. Like we didn't get the FDA approval on the TFX until October -- end of October last year. And of course, there was 2 years of denials of that being approved. So that was a big affecting factor within my uplisting vision of this. But I'm real confident in the sales organization right now. I'm real confident in our manufacturing capabilities. My finance team is strong. The team is motivated. My Board has been nothing better than super supportive all the way through every step. And we're ready to make these leaps forward. We've been building up for it for a long time, and I think it's our time.

100%. And 2 more questions I have. If there was any holes or any concerns that you think you still need to be addressed other than financing, which we just discussed, what would that be?

Well, so last year, we didn't have a firm answer. We couldn't just lay it out into a speculative conversation on the coding, the reimbursement of the allograft SI products. It was just -- there was just too much murkiness in the messaging. So for me to say one thing and then have it come back later that it wasn't accurate was possible. So I just said, well, let's just keep what we're doing, keep selling what we have, and let's keep participating at these conferences that are discussing about the future coding reimbursements. I mean where the stuff all got stemmed from why the coding reimbursements changed after all these years, and we're talking over 20 years of no changes to the code whatsoever. And then all of a sudden, there was all these changes that happened. This last -- a month ago, when we were at this conference, there's been some new outlines laid out there for coding reimbursement. As you know, the allograft system is underneath the T-code right now. So [indiscernible] reviewing T-code coding reimbursement. We know that going into next year that the allograft will be coded out differently than, say, a metal implant such as the TFX that's underneath the 27279 reimbursement code. We feel the TFX meets and exceeds all the codes and reimbursement CPT code. And our proof is in -- obviously, is in the use of the product. We've already been -- already built out the TFX Medicare and Medicaid, private insurance, work comp injuries, personal injuries, even some Indian reservations, government facilities. So we've really gone all the way across the board with that -- with our products being used, including private payers. So I think it's a better view today than it was even 1 calendar year ago what the coding reimbursement, because it really didn't affect us until midyear last year. But when it hit it, it hit everybody. David Rosenkrantz, give him credit, he came out to one at the conferences. And I'm friends with some obviously competitive companies, and I introduced him to some of the other CEOs that I know. And we asked the same questions, like how many allograft systems, how did it affect you in your business? And it was eye-opening for David to hear what these guys say, like how this coding murkiness and the conversation really affected that sector. Because they're all priced, so they don't have to report their numbers like we do, and it affected their business dramatically. So the coding and the reimbursement is key. It's really falling well in our favor. And I think that as long as we keep doing it thoughtfully, training the people, getting good clinical outcomes, we're going to enter into a multicenter study with TFX, even though the TFX has a lot of traction to it already. And I think that's all tied to the murkiness of the coding reimbursement. The doctors who are using TFX know exactly how it's built. It's built in at 27279. And there's no questions about the coding reimbursement. Where there's still a T-code and still they question on what the overall reimbursement is going to be for the allograft systems. And that's what I was going to tell you earlier in your first question of the day was that -- was the problem last year and what was going into this year, but it looks as though it's been sorted out. There's still some things that are out there, to answer the second part of your question. Am I worried about it? We still have to sort through it, but everybody in this industry in the SI space has to sort through it. And I like our chances.

Got you. No, great answer. And if there's any message or if there's anything I didn't ask that maybe you felt that should be asked, what would that be? Like I know I've asked you a number of questions, top to the bottom. But anything that I missed that I should have asked?

Well, yes. So I guess one of the -- we have 3 major sectors of our product portfolio: cervical, thoracolumbar and SI joint products. And yes, there's been a lot of attention to the pain interventional division, and we're very, very thoughtful about that. We want to be good stewards of that sector of the market. But we are not ignoring the ortho and the neuro market. In fact, now that we think that the TFX is a crossover product for us, it should be a hit. Where I don't think the ortho/neuro doctors were all that keen on the allograft systems, although there's many who do use it, but I think that they are more in the camp of something that they could fixate into the bone. They like that idea of placing an implant into bone. And I think that will really resonate with the multicenter study that we'll do, because it will be ortho, neuro, and of course, interventional in that study. I'm really excited about that. So I guess the question would have -- I think we should ask ourselves again in the fourth quarter, how many more ortho and neuro doctors that you guys add on to your customer usage because over 300 cervical -- 300,000 cervical cases performed. And obviously, interventional doctors do not do any cervical fusion cases. That's a question that we need to expand on and build off of. We need to add more of those customers to our company. And then we'll talk about the future of what technologies do we see in the future that I think will be a big impact for Aurora going forward.

Wonderful, wonderful. Thank you again, guys, for your time and Trent for answering the questions. Wonderful. I'm excited to see what Q3 and Q4 brings. So congratulations.

Thank you. Thanks, Tom.

Seeing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Trent Northcutt for any closing remarks.

Thank you. I thank you for all of you joining us today. We really appreciate your time and interest in Aurora Spine. This is a very exciting time and what's ahead of us. If you have any additional questions, please reach out to Adam from Lytham Partners, and we'd be happy to schedule up any follow-up calls. Thank you, everyone. Have a great rest of your day.

The conference has now concluded. Thank you for your participation. You may now disconnect your lines.