Ladies and gentlemen, thank you for standing by, and welcome to the BioStem Technologies second quarter financial results call. All lines have been placed on mute to prevent any background noise. After speakers' remarks, there will be a question and answer session. You may submit a question at any time during the call by using the Q&A box on the webcast portal. Now, I would like to turn the call over to Nick Johnson of Russo Partners. You may begin your conference.
Good afternoon, everyone, and thank you for joining our conference call to discuss BioStem's second quarter 2022 financial results and corporate highlights. Leading today's call is Jason Matuszewski, Chief Executive Officer. We will also be joined by Michael Fortunato, our Controller. Before we begin, I would like to remind everyone that our remarks today may contain forward-looking statements based on the current expectations of management, which involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including risks and uncertainties described in the company's filings with the SEC. You are cautioned not to place any undue reliance upon any forward-looking statements which speak only as of the date made, may change at any time in the future.
Although it may be voluntary to do so from time to time, the company undertakes no commitment to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by the applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with the GAAP are available in the earnings press release on the investor relations portion of our website. With that, I'm now pleased to turn the call over to Jason Matuszewski.
Thank you, Nick. Good afternoon, everyone, and thank you for joining us. Today marks a major milestone for BioStem Technologies as this is the first of many earnings calls. Before Mike discusses in more detail the financial results, I'd like to outline seven key business objectives that will support our continued accelerated growth, commercialization performance, and fortify BioStem Technologies as a recognized leader in perinatal tissue allografts for regenerative therapies. First, as I've shared previously, we have put our company on a tremendous growth trajectory for 2022 and beyond, and we are pleased to announce that we continue to exceed that trajectory with an exceptional financial performance by our commercial team for the second quarter of 2022. Gross revenue for Q2 was $2.2 million, with an 82% gross margin on our product lines.
Second, we are transitioning from indirect to direct sales and implementing training programs for our national commercial team to deliver compelling messaging to our clinical partners in the private and federal markets about the value of our product lines. We're setting out to add a minimum of five commercial team members per quarter starting in Q3 of 2022, with a total team size goal of 25 members by Q4 of 2023. In anticipation of the upcoming launch of VENDAJE AC and VENDAJE OPTIC, which we expect following reimbursement approval of Q1 2023, we are strategically building out our commercial team in 8 specific regions throughout the United States and introducing medical education programs specifically to VENDAJE AC and VENDAJE OPTIC and expanding our current VENDAJE programs.
With the addition of these two product lines entering the wound care market this year and expanding commercial team of our product experts, we're confident in our ability to execute our long-term strategy plan that will help us to increase profitability. Third, we have invested heavily in our sales and ordering platform. We anticipate a rollout of our new Salesforce B2B commerce platform in early to mid Q4, as well as deploying our commercial team with the Salesforce Sales Cloud CRM. We feel the B2B platform is a game changer for our customers as it'll give them easier access to order product and support documentation to increase the success of product reimbursement. Also, with Salesforce Sales Cloud, we will have better insight on our commercial pipeline and our commercial team's interactions with clinical providers throughout the Salesforce data analytics platform for future forecasting.
Fourth, we have recently launched new product web pages that highlight the unique advantages of our VENDAJE AC, and VENDAJE OPTIC product lines. These bold new designs describe the healing, natural, and superior biological retention attributes of our proprietary BioREtain process. We will continue to launch the updated branding in the months to come, including a new corporate website, conference and exhibit booths, and a full suite of customer-facing support materials. Fifth, we have met with the HICS-16 at CMS in anticipation of performing a new submission for a Q -code from Centers for Medicare & Medicaid Services for VENDAJE AC, an allograft composed of two layers, amnion and chorion, which is intended for use as a protective covering for soft tissue wounds.
We also have gone through the same process for VENDAJE OPTIC, an allograft composed of a single layer or amnion, which is intended for use as a protective covering during the repair of ocular surfaces. We expect to receive favorable judgment in the first quarter of 2023 and are excited to add those two additional items to our commercial team's product offerings. Six, our operations and quality teams remain dedicated to continuous improvement and have been working to implement efficiencies within their respective departments. Operationally, we have started construction on a new clean room, which, upon completion, will double our current processing capacity. We have also invested in new technology and equipment to bring more of the processing activities in-house and decrease the overall time it takes to process a donor.
In the quality department, the focus has been transitioning the quality management system, or QMS, from paper-based to an electronic system. After review of numerous systems, the team has commenced implementation of MasterControl, including their MX and TX modules, to move both the quality documentation and processing records to electronic format. Not only does that improve the efficiency of the current processes, this system also reduces the probability of human error. Last, we are well-positioned to overcome the challenges of the regulatory and market conditions of traditional wound care as we push the boundaries in the field of regenerative medicine. We are continuing with the development of new products, expanding our intellectual property portfolio and furthering clinical and scientific research.
This includes receiving six provisional patents around our BioREtain process over the past year, obtaining approval of our peer-reviewed article around standardizing reporting of amnion and amnion-chorion allograft data for wound care, and to be published in the Health Sciences Reports, and plans to initiate clinical research on lower extremity wounds in the near term. With that, let me turn the call over to Mike to review the second quarter and year-to-date 2022 financials. Mike?
Thank you, Jason. Net revenue for the six months ended June 30, 2022 was $4.936 million, compared to $1.809 million for the six months ended June 30, 2021. This is an increase of $3.128 million or 173%. The increase in sales was driven primarily by the expansion of our distribution network, resulting in increased sales of our VENDAJE product. Since CMS granted a Q-code in September 2021, we've seen additional market acceptance and additional sales volume. Gross profit for the six months ended June 30, 2022 was $4.191 million or 85% of revenue, compared to $1.088 million or 60% of revenue for the six months ended June 30, 2021.
An increase of $3.104 million or 285%. The increase in gross profit resulted primarily from increased sales volume in our VENDAJE products, as well as a shift in product mix to our higher gross margin products. Operating expenses for the six months ended June 30, 2022 were $4.6 million, compared to $1.4 million for the six months ended June 30, 2021. An increase of $3.2 million or 230%. Increase in operating expenses is primarily driven by additional headcount, additional marketing spend, investments in a direct sales force, and increases in share-based compensation related to the conversion of debt and accrued salaries to equity at a discount to the fair value of the equity on the date of conversion.
Total other expense for the six months ended June 30, 2022 was a net expense of $233,000 compared to $122,000 for six months ended June 30, 2021. This is an increase of $111,000 or 92%. The six months ended June 30, 2021 contained a benefit of a one-time PPP loan forgiveness of approximately $142,000. Net loss for the six months ended June 30, 2022 was $654,000 or $0.06 per share, compared to $433,000 or $0.05 per share for the six months ended June 30, 2021. An increase in net loss of $221,000 or $0.01 per share. Moving on to statement of cash flows.
Cash flows provided by operations was $664,000 for the six months ended June 30, 2022, compared to cash flows provided by operations of $118,000 for the same period the previous year. The increase in cash provided by operations is due to management's continued discipline over operating expenses as well as an increase in product sales. The company maintained a cash balance as of June 30 of $1.4 million, compared to $270,000 as of June 30, 2021. We continue to strengthen our balance sheet. The company converted approximately $3.3 million of liabilities to common stock during the six months ended June 30, 2022. Jason, I'll turn the call back over to you.
Thanks, Mike. In closing, I want to reiterate the seven key business objectives we've discussed on the call today. Number one, we have put our company on a tremendous growth trajectory for 2022 and beyond. Number two, we are transitioning from indirect to direct sales and implementing training programs for our national commercial team to deliver compelling messaging to our clinical partners in the private and federal markets about the value of our product lines. Number three, we have invested heavily in our sales and ordering platform, providing better customer experience inside our commercial team interactions with clinical providers throughout the Salesforce data analytics platform. Number four, we have launched new product mini sites that highlight the unique advantages of our VENDAJE AC, and VENDAJE OPTIC product lines, and also expanding our marketing presence through our other outlets.
Number five, we have met with the HICS-16 at CMS and anticipating of performing two new submissions for obtaining Q-codes from CMS for VENDAJE AC and VENDAJE OPTIC, and hopefully anticipating approval in the first quarter of 2023. Number six, our operations and quality team remain dedicated to continuous improvement and have been working to implement efficiencies within their respective departments, doubling our production capacity with new construction and moving to MasterControl away from our paper-based quality system. Number seven, we're continuing with the development of new products, expanding our intellectual property portfolio, and furthering clinical and scientific research. All seven of these key business objectives will truly position BioStem Technologies on a tremendous growth trajectory for 2022 and beyond. I look forward to your questions. Operator, will you please open the line?
Your first question at this time comes from the line of Stefan Rohacek with Benzinga. Your line is open.
Hi. I just have a couple questions. First question is, what have been the main drivers behind your quarter-over-quarter growth?
Hi, Stefan. Thank you so much. Jason Matuszewski here. One of the big drivers for our quarter-to-quarter growth has really been the commercialization of our VENDAJE product line, is a membrane, focused, by an amnion, layer, and we're placing that over advanced wounds typically in a chronic state. That focus right now commercially has been really on the indirect side, which is distributors. Then now, like I said in the call earlier, we're shifting to that direct, W-2 sales force to distribute that product. We've been heavily focused in the eight MAC regions or Medicare regions in which to commercialize that product, and that's where we've been seeing initial success. We look to kinda bifurcate that and look at distributing not only in Medicare regions but also in the federal VA system.
Gotcha. Another question for you here. Can you provide a little more detail on what you mean by shifting from indirect to direct sales?
Sure. Kinda what I alluded to earlier. You know, we're shifting away from a distributor-based model to a heavily focused W-2. First, we're investing heavily on sales operation platform through the B2B portal as well as Salesforce Sales Cloud, and then aggressively, you know, onboarding and hiring W-2 sales representatives throughout the eight regions, specifically MAC regions, and you know, continuing to kinda increase and develop that culture, sales culture as well as the sales team.
Got it. What impact do you expect the rollout of the Salesforce B2B e-commerce platform to have on the sales numbers?
I think the B2B portal will help on the clinical side from a clinical operations or front office management perspective, being able to easily purchase the product through the B2B portal. I think also it will have the ability to help individuals or clinicians learn more about products on the platform. Hopefully, at the end of the day, it helps drive our sales team members and commercial team partners to have an easier transition, but also easier way to transition clinical providers to our products for specifically diabetic foot ulcers, pressure ulcers, venous ulcers, products that are in that kinda advanced wound area.
Can you provide a little more detail on your sales education programs? You know, does this include your AC and OPTIC products, or are these gonna be included post Q-code approval?
We'll start that process on VENDAJE AC and VENDAJE OPTIC post Q-code approval. As far as the B2B portal, we're looking to leverage that platform for sales education. We're also looking at other ways to help develop an internal platform to help educate clinical providers on the BioREtain process, which is a proprietary process in which we have developed to help retain a lot of those elements inside the tissue, as well as the use of the product, whether it be specific use cases in diabetic foot ulcers, pressure ulcers, chronic wounds, things of that nature. Helping to learn more about the product, but then also help, you know, learn on best use cases using the product on a specific application.
Got it. Can you provide any details around the quality of the conversation with the HCPCS team at CMS?
Yeah. We had a great call with the HCPCS team. We are anticipating a positive result in Q1 for OPTIC as well as AC. The dialogue was really constructive as far as our submission, and we were able to kinda suss out any areas of weakness and which would possibly cause a denial of that submission. I think we have a strong foot forward to get a positive submission here in Q1 of 2023.
You mentioned the plans to initiate the clinical research on lower extremity wounds in the near term. Are you looking to partner, or what is the indication and timeline there?
Yeah. Right now we're kinda going through the process of potentially identifying a potential partner in regards to specifically diabetic foot ulcers. It's kind of the initial area that we're looking at. Right now we're kinda going around doing some research and trying to identify which clinical partner group that we wanna partner with to start, you know, sussing out how we're gonna attack that clinical trial program.
Got it. Thank you very much. I don't have any further questions.
There are no further telephonic questions. I'll turn the call to Nick for the web questions.
Thank you. First question, are you going to highlight the advantages of BioREtain process in literature and your website, such as time to heal or success outcome rates?
Nick, thanks. We are going to elaborate a little bit more in detail on some of our mini sites in regards to literature. Like I mentioned in the call earlier, we were publishing an article on our current methodology around BioREtain in Health Sciences Reports. We also going to further that study around clinical use of the product and see what outcomes are, call it, sub-10 weeks for healing rates on diabetic foot ulcers. That would be kind of really highlighted on, you know, as we start getting into some of these clinical trials further down the road and then being able to talk about on the clinical side.
On the scientific side, our scientific team is right now working on putting and publishing more white papers around the scientific evidence around BioREtain and the retaining ability of that process to retain more elements inside the tissue. Hopefully to come, being able to post and host some of that information on our B2B portal for clinical providers to provide that information to help highlight that information, get it in the hands of our commercial team members, as they walk through the doors of clinical providers to share that information.
Then hopefully out, you know, as we start rolling out into some of the conferences and things of that nature, being able to get up on the podium and talk about BioREtain processes as well as share it with clinicians at this teaching booth.
Next question. Can you provide us a timeline for the potential of listing?
As many of you know, we've been working at this since 2014. We've had some really great amazing long-term shareholders that have been involved with the company. As of recent, we've engaged an IR firm, Russo Partners, and we're taking the necessary steps not only on the business side, but then also on the public company side to take those next steps to kind of grow the company and mature the company as we go. We're hoping to accelerate that process as fast as we can and hope to see something here in the near future.
Next question. What markets are you currently looking at? Is this U.S.-based or a worldwide initiative?
Kind of what I outlined earlier in the call on our focus of the commercial team. You know, we're focused specifically in the private practice market right now with our products, specifically VENDAJE because we have been awarded Q4252 for VENDAJE. That allows us to commercialize that product in the Medicare MAC regions, which there are eight of them. We've had success in Novitas and Noridian being open and reimbursing our clinical partners for our products. We just recently launched in First Coast and got some positive reimbursements there. Our next attack is Palmetto and CGS, some of those eastern coast areas and where we can actually start commercializing the product, really heavily focused on kind of that MAC region.
Subsequently, as we grow the commercial team, we're gonna be looking at commercializing into the VA and federal systems, locally, initially starting in the Southeast and Northeast areas, as well as Midwest area, as far as those regions for VA and federal partnerships to commercialize product in those areas.
That concludes our written section of the Q&A.
There are no further questions at this time. This does conclude today's conference call. Thank you for joining us. You may now disconnect.