Welcome to the MiMedx Group Incorporated Second Quarter 2012 results conference call. [Operator instructions.] Your speakers for today’s call are Mr. Pete Petit, chairman and chief executive officer; Mr. Bill Taylor, president and chief operating officer; and Mr. Michael Senken, chief financial officer. I will now turn the call over to Mr. Senken. Mr. Senken, you may begin.

Thank you operator, and good morning everyone. We’d like to begin the call with the company’s Safe Harbor statement. This presentation contains forward looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. These statements are based upon the current beliefs and expectations of our management and are subject to risks and uncertainties. Actual results may differ materially from those set forth in, contemplated by, or underlying, the forward looking statements based on factors described in this conference call and in our reports filed with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2011 and our most recent 10-Q. We do not undertake to update or revise any forward looking statement except as may be required by the company’s disclosure obligations in filings it makes with the Securities and Exchange Commission under federal securities laws. I would now like to turn the call over to the chairman and CEO of the company, Pete Petit.

Thank you Mike. Good morning. Welcome to our second quarter shareholder conference call. I have with me today Bill Taylor, our president and chief operating officer, and Mike Senken, our chief financial officer, who you just heard from. I hope each of you has had a chance to read our press release. It was released early this morning. If so, you realize we had a quarter in which our financial goals were generally met, which meant a very nice increase in revenue and adjusted EBITDA over the first quarter. Our revenues increased approximately 32% over our first quarter. This is very robust growth. our adjusted EBITDA for the quarter almost tripled over our first quarter of 2012. Adjusted EBITDA was approximately 19% of our revenues. Please recall that our adjusted EBITDA is fairly close to our cash flow less cash absorbed by growth in our accounts receivable and inventory, and capital expense, which is generally pretty minimal for us. We expect to be able to continue to increase adjusted EBITDA as a percentage of revenue in the quarters ahead, and then produce a GAAP related profit. We also expect our gross profit margins, which were up to 77% this quarter, to increase to over 80% in the quarters ahead. As we expected, the majority of our quarterly revenue came from our AmnioFix family of tissue. These are the allografts used internally for surgery and soft tissue injections. We expect this trend to continue until we grow our wound care offering, EpiFix, in our government accounts, and we clear the reimbursement hurdles. Once cleared, we expect EpiFix growth to surpass AmnioFix. We believe the reimbursement constraints for EpiFix will change rapidly as our randomized controlled trial results for wound care are publicized. We anticipate that will begin to happen during the…

Thank you Pete. Before I go into the operations, I want to take a moment to remind you of all the markets we serve here at MiMedx. MiMedx is a regenerative biomaterials company, not just a wound care company. Our largest revenue to date comes from our offerings in the spine, orthopedic, and sports medicine markets, followed then by wound care and then our ophthalmic offerings. We’re at the halfway point of the year, and right now we’re on top of the goals we set for ourselves. This is the third consecutive quarter where we met or exceeded our revenue goals, and the second consecutive quarter where we’ve shown a very strong growth in adjusted EBITDA. On our $4.9 million revenue, we’ve nearly achieved our longer term target of 80% gross margins, falling just 3% short of it at 77%. With the expected higher revenue next quarter, and likely a higher percentage of direct sales from our own sales reps, resulting from our implementation of a more blended sales model, we’re working toward achieving 80% gross margins, hopefully in the third quarter. Our 32% revenue increase over last quarter clearly demonstrates that we’re continuing to have very strong revenue growth. We have a number of sales agents and distributors that are very effective and are growing their business with us in a very robust manner. We’ve made a lot of progress on the sales administration side as well, and we’re adding systems and processes to effectively handle revenue that is multiple times our current pace. In addition, these systems and processes will allow us to continue to grow with our own direct sales force in the future. On that note, you may recall that we took a very pragmatic approach to initially building our sales force. We contracted with multiple…

Bill, thank you. Let’s hear from our chief financial officer, Mike Senken.

Thanks Pete. For the period ended June 2012, the company recorded revenues of approximately $4.9 million, an increase of 153%, or $3 million as compared to $1.9 million in revenue for the same period in 2011 and a 32% quarter-over-quarter increase, which was in line with our plans. The increase in sales revenue was driven by sales of our amniotic tissue platform, primarily in the spine and orthopedics market, which includes our AmnioFix injectable. As discussed previously, management has been keenly focused on achieving positive non-GAAP adjusted EBITDA, which is a reflection of the company’s operating cash burn, before taking into consideration working capital and other financing and investing activities. Adjusted EBITDA is earnings before interest, taxes, depreciation, and amortization, with the additional adjustment being share-based compensation, which is a noncash expense. Included in today’s press release is a supplemental disclosure that reconciles our reported net income to adjusted EBITDA. The company reported positive adjusted EBITDA of approximately $923,000 for the quarter ended June 30, 2012, which is a $2.6 million improvement as compared to an adjusted EBITDA loss of approximately $2.3 million in the first quarter of 2011. The improvement was driven by increased sales volume with improved average gross margins of approximately 77%, which is a 3% improvement over the previous quarter. Operating expenses increased approximately $508,000, with increased spending in randomized controlled trials, our reimbursement hotline, and our sales and distribution network. We would expect these investments in our sales and marketing organization to increase in subsequent quarters. The net loss for the quarter was approximately $744,000, or a loss of $0.01 per diluted common share, which is an improvement of approximately $1.8 million, as compared to the reported net loss of $2.5 million, or a loss of $0.03 per diluted common share for the quarter ended…

Thank you Mike. Our goal of being the most experienced organization with amniotic membrane tissue allografts worldwide is being achieved. The scientific testing of our process tissue, as well as unprocessed tissue, and our clinical studies are providing a significant database which today means we are achieving that goal. In addition, when you add the fact that we have now manufactured, processed, and shipped approximately 100,000 grafts, that solidifies the point that we are the clear leader in this exciting new area of allograft technology. And we will remain the clear leader. Relative to the quarter, I’d certainly classify our performance as excellent. We will continue to report this type of progress in the future. I’ll now open the call for questions and answers.

[Operator instructions.] And our first question comes from Bruce Jackson from Northland Capital.

First, with the reimbursement, right now I believe that people are using a C code for Medicare? And do you anticipate getting approval for a Q code something later this year?

This is Bill. We have filed for a Q code, and in May CMS had issued their preliminary decision to issue a Q code. So that was all very positive for us. And they don’t make their final determination until I think it’s early November. But as I understand it, once you receive a preliminary decision, generally speaking, it will move forward to the final. So that’s looking very promising for us right now.

And then with the manufacturing expansion, what are you scaling operations to in terms of revenue right now? Do you have enough floor space? And how many shifts are you running?

We’re running just one shift right now, and the way we’re anticipating it, is we want to start bringing on a second shift probably in the neighborhood of the fourth quarter this year, begin bringing the people in and getting them trained so we can have at least a partial line running on the second shift. We have basically several lines in our clean room right now. We bring up one entire line at a time to run most efficiently. So that’s what we expect shift-wise. On the floor space, we have enough floor space to expand our clean room in our current facility to be about double the size that it is right now. And we’ve got about 40,000 square feet in total for the company, and the current manufacturing processing space is about 20,000 square feet of that.

And then last question, on the randomized clinical trials, so the first one we’re going to see results for is one of the diabetic foot ulcer trials. Is that going to be this quarter?

That’s what we expect, yes.

And the one after that, I didn’t quite catch it, was it the venous ulcer trial?

We have a venous legal ulcer trial. The enrollment on that is not as fast as what we’ve had on our DFU trial. So that one’s going to take probably throughout the end of this year before we’re going to be able to close that out is our best estimate right now. We’re starting 2 more DFU studies, and we seem to find enrollment in the DFU, at least with the investigators we have right now, seems to be quite a bit faster than VLU. So it’s possible that even one of those additional DFU studies gets completed before our first VLU study.

Our next question comes from Bill Plovanic from Canaccord.

Just to go back, so the first DFU trial and the VLU trial, the ones that are ongoing, how many patients do you expect in those? Were those 80 per study? Is that the goal on those?

The numbers we started with those, if I remember correctly, is 80. I think it’s possible on our first one that we’re going to be closing out with fewer than that, because of the results that we’re getting on the initial study. But most of our studies are targeting initially in the neighborhood of 80 patients.

And in the new ones that you plan on starting, the 2 more, you’re targeting 80?

That’s right. That’s what’s in the protocol, if memory serves correctly, yes.

And then I think one of the comments that is kind of surprising to me is that the growth you’ve seen thus far has been in the spine and ortho, in sports med, I believe it was with the injectable. Is that really where the growth is coming from today? Did I catch that?

Yes, just to clarify, that’s our AmnioFix line, which is our internal or surgical, or injectable, and on AmnioFix, we have a membrane as well as an injectable. So that comment regarded the majority of our sales so far are in the AmnioFix line, which include the membrane and injectable.

But it’s more in the spine ortho. We haven’t really seen a ton of uptake yet in the diabetic flow. That’s kind of still out there as an opportunity? Or am I reading this wrong?

That’s correct, and the only thing that’s slowing us down there is our reimbursement. We’ve got private pay, but the majority of that market as we see it today is going to be Medicare and/or VA. And we’re just having to break those barriers down, because while we have the C code, the Medicare intermediaries are now a lot different than they were a few years ago, and you have to do a lot of extra data for them.

Yes, as I understand it, 4 or 5 years ago, once you got a C code or a Q code, for the most part these wound care products would get reimbursement and wouldn’t be pushed back on from the intermediaries or the MAC groups. But since there’s so many wound care products out there now, the MAC groups are pushing back and asking for even more data even after you get your C code or Q code.

And then as we talk about this DFU market, so you have the first study coming before year end, and then you’ll start enrolling in the next one. So that data will be available first half of next year. How many of these Medicare -- will they accept 1 study, 2 studies? These intermediaries, how do they look at this?

Actually we have a couple of the MAC groups that are reimbursing right now. There are a few that say they aren’t, but will occasionally do it. But most of them either say they want 1 or 2 RCTs. I don’t know the exact breakdown of that, but I do know Don Fetterolf, our chief medical officer, has interacted with a large percentage of them, and he’s gotten responses. Generally speaking, it’s either one or two.

And remind me, the one that you have coming up, that will be your first randomized controlled trial that you’ll have data on that you can take to them, correct?

That’s right. And then as I mentioned, we’re starting 2 more DFU studies in August that we expect those should be completed by the end of the year as well.

And remind me, the one that you’ll get in the next quarter or so, when did you start enrollment on that?

About 90 days or go probably.

Three or 4 months ago, something like that.

Okay, so that just gives us some clarity on if you’re starting a couple of trials soon, the data at year end, you’ll have 2 or 3 studies you can take to these intermediaries early next year.

That’s our expectation, Bill.

And then just last question, is the selling you’ve done so far into the spine, ortho, sports med businesses, how much of that is into stocking distributors? And how much of that is going through the independent agent rep model that gets paid on implantation?

The majority of it is going through the distribution model, the distributors.

So everything we’ve seen thus far is either, it’s sell-through in the procedure or it’s stocking onto a hospital shelf. It’s not going kind of into a distributor inventory?

I guess, Bill your concern would be do we have a lot of inventory sitting on a distributor’s shelves, and I think that’s not the case. From what we can tell, and we monitor that fairly carefully ourselves, and need to, this is going right through the process now. If you roll the clock back 6 months, that might have been a bit of the case, but it seems like this last quarter that’s going right on through into the system.

It’s flown through pretty quick. We’re getting some pretty good turns, I think.

[Operator instructions.] And our next question comes from Tony Subitoni, a private investor.

Two questions please. Number one, the margins are obviously substantial, and you’re projecting an increase in them. What’s accounting for the margins, and is it the same element that will provide for the increase that you’re projecting in the future? Is it operating efficiencies? What’s accounting for that? And secondly is a much more 30,000-foot question, and that is what are analysts projecting for the company, both short and long term?

Well, let me take the 30,000-foot question, and then Mike can give you the detail. At this point, we have several analysts that are in the process of preparing reports, at least that’s what we’ve been told. And they’re querying us for more information and data, as they should. So at this point, we have no analyst reports out on the company, but in the months ahead, we expect to have several. Now I’ll let Mike give you the specifics.

Coming back to the question about the improvement on the margins, it’s a combination of operating efficiency, so obviously as our volume increases we’re absorbing fixed costs, which help the overall margins, and in addition to that, the mix improvement. As we expand our sales into the wound care market, and further expand into sports medicine, orthopedics, and even spine, those markets generate a larger margin than some of the base legacy markets that we still serve, such as the dental market and the ophthalmic market.

That’s actually pretty good news, at least I interpret it that way, that the analysts really haven’t stepped up yet.

That’s correct, and I think they’re doing their homework, as they should. And we need to continue to show them the progress that we’re currently showing them, and then I expect there will be a lot more coverage on the company.

[Operator instructions.] And our next question comes from Nathan Cali from Noble Financial.

Just one quick follow up question to the Q code, with respect to receiving that in Q1, is there visibility on pent up demand once you do receive that Q code? And do you expect that to catalyze, obviously it would hopefully catalyze additional revs in 2013, but is there any gauge on that? Do you have any outlook from that perspective?

In wound care, where the use of our allografts can be seen within a week or 2 of applying it to the wounds, the demand is very strong, because physicians, as soon as they debride and do that properly and apply our EpiFix, they come back within a week or 2 quite excited. So there’s a huge demand for our EpiFix product in wound care. The only issue that has thwarted us to some extent there is particularly the Medicare C code reimbursement through the intermediaries. And that’s where we’ve been putting a lot of work, and we’re ready as soon as the first study comes out. Don Fetterolf and his staff will be out to all the intermediaries saying, all right, here it is. We told you it was coming, and you’ve seen the other data. So we think as soon as the barriers come down on our wound care reimbursement, there will be a huge increase in our volume, and we’re trying to prepare for that production.

Yes, it’s hard to put an exact number on that, but what I can tell you is we have, in probably every territory that I can think of, where EpiFix is being sold right now, the single biggest pushback is not having the Medicare MACs cover it. And once we get their coverage, and then we get the Q code and are able to get the reimbursement in the physician’s office, we expect to have multiples increase quarter-over-quarter, not just a percentage increase. We’re talking several times our business each quarter should advance with that. Now, prior to that, we’ve got a renewed focus in the VAs, and we’re starting to get some good movement now in wound care in VAs, and hopefully next quarter we’ll be able to talk to you and see what that effort has provided. But that’s looking very promising.

Do you think you’re hearing that across the board, as far as what you’re hearing from the field, from your direct and indirect reps?

Yes, it’s a consistent message across the field, and a consistent message from the physicians we talk with as well. They’re very interested, and they definitely want to use it. A lot of the physicians are trying to find ways to use it with their private paid patients right now, and a lot of them are having some success there. So they’re getting good experience with it, and they see that it’s very cost-effective. You don’t have to have as many applications as other technologies. They can apply a size-appropriate graft, which obviously would have a different cost associated with it. So they’re very excited about it.

[Operator instructions.] And we have a question from Chris Mellon from Mellon Strategic.

We’re raising some money with the warrants. Is there any thought to putting some of that toward the collagen fiber?

Good question, and let me give a little more explanation there. What Chris is referring to is our collagen fiber that was one of the foundational components of MiMedx Group some years back. And this management team did our best to bring that prod into the market. We were continually thwarted, over the last two years, by the Food and Drug Administration. We went to Europe. We got approvals for it in Europe. But at this point, until we see some sort of change in perhaps philosophy at FDA in terms of some new technology and a little more collaborative work with companies that are trying to bring new technologies to market, I don’t know that it’s worth us putting a lot of effort into it. The message was pretty clear. Since I’ve dealt with the FDA since 1976, I think I know the agency pretty well, and there’s a time where you just fold your cards, and there’s a time when you play your cards. And at this stage, I don’t think that the company’s going to be devoting any substantial funding to our collagen fiber. We’ve had discussions over time with other companies that had a strong interest in it, just as we did, and have the long term, perhaps patience and funding to take it and develop into something that should be developed in, which is a very exciting breakthrough in soft tissue repair. But at this stage, all of our resources are pretty much -- all focused on our amniotic membrane tissue allografts. And the day-to-day activity here with our management team, I don’t know that we could load ourselves up with another major initiative.

Now I’ll turn it back to you, Pete, for closing remarks.

Well, thank you very much. I think we’ve had some good questions, and I’m glad to see some analysts are beginning to fire the questions at us that need to be answered. Hopefully we’re going to continue to show this kind of progress. From what we can see, we have all the things going for us to be able to do that. This is an exciting new allograft, exciting new technology. We’re the clear leaders in this space. We will remain the clear leaders in this space, and continue hopefully to produce the kind of exciting results we’ve showed over the last few quarters. Thank you very much.