Greeting. And welcome to the Xtant Medical’s 2016 Results Conference Call. [Operator Instructions]. It is now my pleasure to turn the conference over to your host, Mr. John Gandolfo. Thank you. You may begin.

Good morning. My name is John Gandolfo, CFO of Xtant Medical. Thank you for joining us today for the Xtant Medical Holdings, Inc. second quarter 2016 results conference call. With me on the call today is Dan Goldberger, Xtant’s Chief Executive Officer. Yesterday afternoon, Xtant was pleased to issue a press release announcing second quarter 2016 financial results. Today's call is being webcast and will also include a slide presentation which has been posted on the company's website. Following remarks by management, the call will be opened up for your questions. We expect the duration of the call to be approximately one hour. During the course of this call, management may make certain forward-looking statements regarding future events and the company’s expected future performance. These forward-looking statements reflect Xtant’s current perspective on existing trends and information and can be identified by such words as expect, plan, will, may, anticipate, believe, should, intend and other words of similar meaning. Any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, including those noted in the Risk Factors section of our most recent annual report on Form 10-K. In addition, any unaudited or pro forma financial information is preliminary and does not purport to project the future financial position or operating results of the company. Actual results may differ materially. For the benefit of those of you who may be listening to the replay, this call was held and recorded on Tuesday, August 02, 2016 at approximately 10 AM Eastern Time. Since then, the company may have made additional announcements related to the topics discussed herein. Please reference the company's most recent press releases and current filings with the SEC. The company declines any obligation to update these forward-looking statements except as required by applicable law. With that, I would like to turn the call over to Dan.

Thank you, John. Last night, we issued a press release announcing our second quarter 2016 results with core recurring revenue of $20.9 million, representing 5.6% year-on-year growth. We continue to transition the business away from OEM partners in favor of higher-margin sales to end users what we call, core recurring revenues. Gross margin has expanded to 68.5% as a result of that emphasis and improving operational efficiencies. Second quarter 2016 revenue in total was approximately $21.5 million, slightly lower than pro forma second quarter 2015 revenues of $21.6 million but it does represent a 2.3% sequential increase from $21 million in the first quarter of 2016. As we discussed last quarter our supply chain fell behind during January and February of 2016, that shortage of certain inventory made it difficult for us to grow the business in the first quarter of 2016. We were able to replenish most of our finished goods inventory by the end of February but certain products specifically Certex and Irix-C remained on allocation until the end of May 2016. Revenue from 3Demin and OsteoSelect are increasing nicely, but those products continue to be on allocation as we optimize our tissue processing capabilities. We recently announced the completion of our tissue processing expansion in Montana and that will continue to improve availability of these high demand products. Inventory allocation was a drag on growth during the first quarter of 2016 and is only partially relieved in the second quarter of 2016. We believe that as much as $2.5 million of additional revenue could have been achieved during the first half of 2016 with fully stocked shelves. We will continue to implement systems to better forecast and manage our supply chain in the future. We continue to emphasize our distribution channel that's calling on orthopedic surgeons and…

Thank you, Dan. Slide 9 outlines selective profit and loss statement information for the company on a pro forma basis. Total revenues for the three months ended June 30, 2016 was $21.5 million slightly lower than $21.6 million at pro forma revenue for the same period of 2015. Net loss in the second quarter of 2016 of $4.5 million remains flat as compared to pro forma net loss of $4.5 million in the second quarter of 2015. Gross profit grew 4.8% to $14.7 million from pro forma gross profit of $14 million during the same period of 2015. Our gross margin grew 3.6% to 68.5% from 64.9% for the same period of 2015. For the second quarter of 2016 EBITDA was a gain of $333,000 compared to a pro forma gain of $949,000 in the second quarter of 2015. Sequentially we had a strong improvement in EBITDA from a first quarter 2016 loss of a $145,000 with a positive $333,000 reported in the second quarter of 2016. Slide 10 shows the balance sheet comparison between June 30, 2016 and December 31, 2015. As of June 30, 2016 total current assets included approximately $14.7 million of net accounts receivable and $25.5 million of inventory. Total liabilities included $68.8 million at convertible debt and $46.7 million of original principle amount senior secured debt which was incurred to fund the X-Spine acquisition in July of 2015. Company reported positive shareholders’ deficit of $496,000 as of June 30, 2016. In addition to our cash and cash equivalents balance, the company has approximately $8.5 million remaining on it's equity credit facility with Aspire Capital. In addition we’re seeking an increase of our cash receivable revolver credit facility with Silicon Valley Bank has an borrowing base of eligible accounts receivable and well-above the current $6 million facility. The company defines non-GAAP profitability as EBITDA less total cash-based interest expense. We have lowered our target for quarterly non-GAAP profitability breakeven to $24.2 million from the previous estimate of $24.7 million due to an ongoing expansion of the company's gross margins and reductions in our operating expenses effective with the second half of this year. On an incremental basis, after breakeven, the company expects a profit margin of approximately 45%. This point is highlighted on slide number 12. As this slide shows for each $1 million of additional revenue after breakeven has achieved, approximately $450,000 or 45% of operating profit would drop to the bottom line. I would now like to turn the call back over to Dan.

Thank you, John. I'm thrilled by the product [indiscernible] see in our distribution channel. By resolving the inventory bottlenecks launching more than 100 new instrumentation trays and increasing our biologics processing capacity I'm confident that our revenue will accelerate in the second half of the year. Do not underestimate the excitement that OsteoVive is creating in our distribution channel. That said, we've modified our operating plans to emphasize profitable revenue growth for the foreseeable future. We implemented a reduction in-force in May 2016 representing about 8% of the Company's total headcount. A variety of operating expense reductions are being enforced in the second half of the year. We are reducing our full year 2016 revenue guidance in recognition of several factors. Product shortages in the first half of the year cost us to miss about $2.5 million of surgical cases that cannot be recovered. Our original guidance anticipated that 10% to 12% of our revenue growth would come from new customers, given our supply chain challenges in the first half we directed our sales force, our sales function to focus on preserving our existing customer relationships at the expense of recruiting new customers in the first half of the year. The consequences of that shift in strategy leads us to a $1.5 million reduction in revenue for the full year. And thirdly, we continue to manage the business away from resellers in favor of higher margin and user can time that sales to hospitals and physicians. Historically the company generated about $1 million of revenue from resellers making direct purchases from the company per quarter. As we bring additional discipline to the company the end of quarter hockey sticks have been reduced in favor of higher margin recurring revenue. We are reducing guidance by approximately $2 million in recognition of…

[Operator Instructions]. Our first question comes from Jason Wittes with Brean Capital. Please proceed with your question.

I wanted to ask about 3Demin, production is being expanded. How quickly do you think do you expect the ramp? I think you said on the call that you think this could be a $4 million to $5 million rolling product. I guess if you can give us a premiers around that in terms of A, when you might have enough supply to actually supply that much inventory and B, in terms of uptick when you think you could reach that kind of uptick?

So we announced doubling the physical plant capacity in Montana a month ago or so and now so that will effectively double the capacity and if we direct as we adjust product mix or even add shifts as that facility comes fully online towards the end of this year we should have that full supply for 2017. The channel demand I see getting to that level as we roll into 2017 probably the second half of 2017.

Second half, okay. And then when you said direct sellers, were you specifying OEMs or direct sellers within you're a distributor network? I just wasn't clear on that.

So the majority of our business and the focus of our business is end user sales to physicians, to surgeons and the hospitals they work in and those sales are run through either our sales function or through independent agents who get paid straight commission. There's a portion of the legacy business primarily from X-Spine that was a reseller structure where product was sold at transfer price and we are working with those resellers to convert their business to end user sales and pay them commissions instead.

So that's being phased out. Also wanted to get a sense of how we should be thinking about the OEM business? I think that's primarily with Zimmer, is that a focus or is that something that goes away at some point? Any thoughts on that?

It's been very small this year and we don't see that going. We don't see that moving from current levels in the future.

[Operator Instructions]. There are no further questions. At this time I'd like to turn the call over to Dan Goldberger for closing comments.

Thank you everybody. We look forward to improving results through the rest of the year and we appreciate everybody's support. Have a great day.

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.