00:04 Welcome to the Sanara MedTech, Inc. Third Quarter twenty twenty one Results and Business Update. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. [Operator Instructions] 00:28 It is now my pleasure to turn the floor over to your host, Callon Nichols, Director of Investor Relations. Sir, the floor is yours.

00:35 Thank you, and good morning, everyone. I'd like to welcome you to Sanara MedTech's earnings conference call for the quarter ended September thirty, twenty twenty one. We issued our earnings release Friday afternoon and I would also like to highlight that we will post the link to today's deck on our Investor Relations page. The supplemental deck as also a copy of the earnings release, the 10-Q, and a transcript of this call will be available on this page. We will reference this information in our remarks today. 01:07 We expect today's prepared comments from Ron Nixon, Executive Chairman; Mike McNeil, Chief Financial Officer; and Zack Fleming, President of Surgical to last approximately 15 minutes to allow time for Q&A. 01:22 Certain statements in this conference call and our press release and in our supplemental deck include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of nineteen ninety five. For more information about the risks and uncertainties involving forward-looking statements and factors that could cause actual results to vary from those projected or implied by forward-looking statements. Please see our most recent Form 10-Q and annual report on Form 10-K. 01:50 Now I'd like to turn the call over to Ron.

01:55 Thank you, Callon, and good morning, everyone. I'll begin with an overview of the third quarter and then we'll provide an in-depth discussion for each of the subsequent slides that pretended that were given to you. Sanara generated five point eight million dollars in revenue and a net loss of two million dollars in the second quarter of twenty twenty one. Despite an impact from the COVID-19 Delta variant in key large markets, including Texas, and the Northeast, this was the second best revenue quarter for the company in history and was driven by surgical product sales. 02:28 Our net loss was largely driven by an increase in SG&A, which was one point eight million dollars higher than Q3 twenty twenty, approximately seventy percent or one point three million dollars of this increased SG&A was due to increased direct sales and marketing costs related to the expansion of our surgical sales force as well as higher commissions due to higher product sales. 02:53 Rochal asset acquisition, which we completed in Q3 contributed approximately two hundred and sixty thousand of incremental SG&A when compared to Q2 of twenty twenty one. Adjusted for one-time reclassification of R&D expense in Q3. These were planned expenses to expand our sales force and research and development capabilities to further advance our six focus areas. 03:18 The surgical team has continued to focus on adding high-quality experienced regional and territorial sales managers to our team obtaining hospital approvals, product adoption, and introducing new products. Zack will discuss the specifics in his remarks this morning. We continue to see additional opportunities for our products and surgery and are continuing our pursuit of clinical evidence for outcomes. 03:43 In the third quarter, we continued introducing our telemedicine and virtual care business WounDerm. We executed an agreement and…

05:16 Thanks, Ron. Our surgical division continues to grow in terms of sales, hospital approvals, and the size of our team. In the third quarter, we added people to our sales team, bringing the total to twenty nine regional and territory sales managers. We continue to see growth in our distributor partnerships and increased both the number of teams and individuals representing our products. 05:38 At the end of Q3, CellerateRX have been sold in over three hundred and ninety five hospitals and ambulatory surgery centers across twenty one states and it was approved to be sold in approximately nine hundred ninety facilities. As we've discussed before, we believe there are approximately twelve thousand hospitals and ambulatory surgery centers in the United States where Cellerate could potentially be used. 05:58 In Q3, we continued to see strong demand for an interest in our products, we faced headwinds in a few of our key markets in Texas and the Northeast due to the COVID-19 Delta variant surge. However, as with previous surges, we believe that the majority of these procedures were postponed and will eventually be performed. Year-over-year, we have seen some headwinds due to cost per case, but we are working to mitigate the impact of this through win-win contracting opportunities in those facilities. 06:25 Subsequent to the end of the quarter, we announced the commercial launch of two new products that we have licensed from Cook Biotech, FORTIFY TRG Tissue Repair Graft and FORTIFY FLOWABLE Extracellular Matrix. Adding products to our surgical bag has been a strategic goal of ours and should allow us to increase our operating profit as these products begin to generate revenue for the company. 06:45 I'll now turn it over to our CFO, Mike McNeil to discuss our Q3 financial results.

06:49 Thanks, Zach. During the third quarter, we generated revenues of five point eight million dollars compared to revenues of four point three million dollars for the third quarter of twenty twenty, represented a thirty five percent increase from the prior year. Year-to-date through September thirty, twenty twenty one revenues totaled seventeen point one million dollars compared to revenues of ten point eight million dollars for the same period last year, which represented a fifty eight percent increase over the prior year period. 07:16 The higher revenues in twenty twenty one were primarily due to the increased penetration of surgical wound care products of our sales force additions last year in our continuing presence strategy to expand our independent distribution network in both new and existing U.S. markets. As Zach discussed, we have faced some headwinds due to the COVID-19 Delta variance and cost per case concerns. 07:36 We had a net loss of two million dollars for the third quarter of twenty twenty one compared to a net loss of one point two million dollars for the third quarter of twenty twenty. The higher net loss in the third quarter twenty twenty one was primarily due to higher SG&A expenses which were approximately one point eight million dollars higher than prior year, partially offset by higher third quarter gross profit which was one point four million dollars higher than the same period in twenty twenty. 07:57 Third quarter depreciation, amortization and other expenses collectively were approximately four hundred thousand dollars higher compared to prior year. For the nine months ended September thirty, twenty twenty one, we had a net loss of four point four million dollars compared to the net loss of four point two million dollars for the same period of twenty twenty. The higher net loss for the nine months ended September thirty, twenty twenty one was primarily due to higher SG&A partially helped by higher revenues. The higher SG&A expenses of twenty twenty one were primarily driven by increased selling costs as a result of sales force expansion, and higher sales commissions due to higher product sales. 08:30 Finally, looking at our balance sheet, we ended the second quarter in a strong financial position with twenty two point four million dollars of cash on hand. 08:37 I will now turn it back over to Ron for a few closing comments.

08:39 Thank you, Mike. As we've discussed historically, our goal-led scenarios to offer a comprehensive wound and skin care strategy that can help providers and patients treat wound and skin conditions than any care [indiscernible]. In the third quarter, we continue to advance that goal by increasing penetration in the surgical wound care market adapting our EMR to home health care vertical and executing and launching a pilot for our Virtual Console services with the major home health care company while simultaneously pursuing other pilots. We continue to seek opportunities to expand and improve our overall strategy. 09:17 That concludes this quarter's comments and we look forward to answering any questions you may have. Operator, we're ready to open the call for questions. Thank you.

09:27 Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Our first question today is coming from Ian Cassel at MicroCapClub. Your line is live. You may begin.

10:32 Yeah, I guess the question, I would have is on the two new products from Cook Biotech. Are those products, do you expect those to be material to the company in twenty two or do you think that's more of a twenty three or twenty four materiality on these two products?

10:47 Yeah. Ian, this is Ron Nixon. I'll turn that over to Zach. And Zach if you don't mind you can share with him your thoughts on when these will be penetrating the market.

11:00 Sure. So we believe that they are good, very good products. We are already seeing some adoption with the four to five products. I do believe they will produce a reasonable amount of revenue next year, as you know there are some difficulties in getting products approved. But we're in the midst of that right now. Gaining some approvals in different facilities, doctor trials, and those trials are going very positive.

11:24 Thank you. Maybe a follow-up. I see that you're up to I think twenty nine RSM. So, I was wondering where do you see that kind of peaking out to hit all fifty states?

11:36 I think we need covered across all fifty states, we are doing this TM model. I think you guys have heard about that, that's the territory manager model where we get higher penetration in each market. And with that model, we're starting to see that there is some great legs to that, we're seeing great expansion within those facilities. And so that number of kind of evolves into somewhere between forty and fifty we believe, total number of heads, and that's really dependent on our ability to get into facilities and create kind of a broad network of doctors, within that facility. And those TM's are doing a good job of that. So I think it's going to be in a forty to fifty range, roughly one per state. Obviously, a little higher density in the Northeast.

12:18 But, I think, Ian, to your point, the regional sales managers, we have found that we're able to get leverage off of them and they can cover more than one state so as Zach mentioned, that's the combination of territorial and regional sales managers.

12:34 Great clarification. Yes.

12:35 Okay. Thank you. Maybe just a follow-up, I saw that you're going to have your submission filed for the 510(K) for Precision Healing, what's the timeline for approval on a product like that? And it seems in previous slide decks, it seems like that product or that diagnostic is a real competitive advantage to the company, nothing like it on the market?

12:57 Yeah. Thank you, Ian. We actually do believe that has very competitive advantage to it. It provides more data with the biomarkers that we've identified than any other device that we know-how in the market. As to how long it would take historically it had been ninety days or less to receive FDA approval on a device like this with today's COVID impact and just hiring impact. The FDA has been constrained and we've seen a slowness in their approval process and has been very hard to predict, but we are hopeful that we will have it by the end of the second quarter.

13:38 What is the form factor like of that product? Is it sort of like an iPhone-looking device or how should somebody, think about it?

13:46 Yeah. It’s -- the original prototype was a little bit larger than an iPhone and the thickness of it is a little larger because of the room that you need for the lenses, and the filters that are on that camera. Over time, we see that adopting into a different form factor that potentially could be smaller and easier to use. And that's what our engineers to working on now for that next generation already.

14:16 Okay. And I think within your prepared remarks, you mentioned Biosurge. Can you talk about the potential of that product and when do you expect that to have to be on market?

14:25 Yeah, Zach, I'll let you take that.

14:27 Sure, we think there is a great potential there, medicated washes or a kind of a new thing in the hospitals, you'll see a few different market entrants in there already. And what we're looking for, what they're looking for in the hospital's consistency and obviously another way to battle some downstream infection problems in the surgical space. So when they put an implant in they're trying to reduce bacterial seating as well as any kind of deep infection. So this type of a product is very useful in washing the surgical area, the cavity and then obviously rinsing it out and then putting -- closing the wound. So we think it's a really good opportunity, we do think that that will come into fruition towards the start of twenty twenty three. So we should get through everything and some additional testing trials, approvals everything by the end of this coming year twenty twenty two.

15:21 And, Ian, we expect to have the same type of results that we have seen on our existing BIAKOS product in terms of impact on bacteria.

15:34 Okay. And maybe one last question. There's a lot of moving parts of the story, you're working on a lot of things. I mean, looking out maybe even just twelve months, where do you hope to have the company positioned?

15:48 Well, looking out twelve months, I would tell you that as it's obvious from the amount of capital, but we have spent on our advanced wound care strategy which involves all the component parts of the six focus areas beyond what surgical needs are. And then you look at the support of the virtual consult, our EMR that has been developed and to be able to add scan as well. We see that the conversations with our managed care potential partners, home health, et cetera should be evolving to where those are starting to have penetration into those markets within the next twelve months in a more significant way to offset some of the losses that we've incurred by spending ahead of the curve on advancing that strategy.

16:40 Good. Thank you. Thanks for taking my questions.

16:43 Thank you, Ian.

16:47 Thank you. [Operator Instructions] Our next question is coming from Evan Claar at CBI Capital. Your line is live. You may begin.

17:11 Thank you. Good morning. I have somewhat remedial questions that maybe require some education. I'm interested in CellerateRX's traction in the marketplace. And I see the large number of hospitals approved against three hundred and ninety five hospitals using it in the quarter. Can you give us some inkling of the three hundred and ninety five, how many are new? And how many are repeat users from prior quarters? And what it cost per use? So how much revenue you get per use?

17:48 Yeah, Zach. I'll let you take that. And Zach, you can just -- a lot of that is already in the press release and some of the historical data, so you could just site that time if you would.

18:05 Yeah. Hi, there. So three hundred and ninety five, it's roughly about I believe one hundred or so more than the previous quarter. Callon might have that right in front of them as far as the exact number, but we are making good headway there. Our goal of the nine hundred or so, that is approved. And what really trying to do there is find those hospitals where there is a need, where they do have some patients that fit the type of patient profile that we're looking for next that patient it is comorbid and has a lot of different issues that might impact our healing. And so that's the type of hospital, looking forward and of course, looking for the surgeons that treat those patients. And so it is a little bit of kind of seek and find within those nine hundred ninety hospitals and as we start to do that, as we've been doing that we're starting to expand both in those four hundred hospitals roughly, but as well into more hospitals. So that's really the goal of the whole thing and it's going very well. So we're really excited about that, but it is a little bit of a needle in the haystack to try to find those patients, not every hospital has those types of patients, as you know.

19:11 Thank you. What I'm guessing is that we're seeing, one to two uses per week per hospital on average and is this a much smaller TAM or addressable market, because you need people with these special elements? Can that rise materially?

19:34 Yeah. I don't think probably describing as a needle in a haystack is quite accurate because if you look at the population of people that are having hip replacement and having other types of ortho, spine surgery, et cetera general surgery. When you start talking about the aging [Technical Difficulty] and look at how the baby boomers are aging. Many of those patients have comorbidities, then it's a matter of education to the surgeons to let them understand there is a product out there now that can help them with the healing aspect of these patients due to the high number of comorbidities that they have.

20:17 Gotcha. And do you get about seven hundred in revenue per use?

20:24 We don't like to give out that number for (Technical Difficulty). But I would just say year-end the ballpark.

20:35 Okay. Thank you very much.

20:42 Thank you. We have no further questions in queue, at this time, I will now turn the floor back over to management for any closing remarks.

20:53 We really appreciate everybody participating today. Thank you very much and we look forward to continuing to do this in the future. Thank you all for being in attendance.

21:05 Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time and have a wonderful day. We thank you for your participation.