Cytomedix's CEO Discusses Q3 2013 Results - Earnings Call Transcript

| About: Nuo Therapeutics, (NUOTQ)

Cytomedix, Inc. (CMXI) Q3 2013 Results Earnings Call November 13, 2013 8:00 AM ET


Paul Arndt - Managing Director, LifeSci Advisors

Martin Rosendale - Chief Executive Officer

Steve Shallcross - Chief Financial Officer


Jason Napodano - Zacks

Scott Pittman - Calton & Associates


Good day, ladies and gentlemen. And welcome to the Third Quarter 2013 Cytomedix Earnings Conference Call. My name is Alex, and I will be your operator today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator instructions)

As a reminder, this call is being recorded for replay purposes. And now, I’d like to hand the call over to Paul Arndt, Managing Director of LifeSci Advisors. Go ahead please.

Paul Arndt

Thank you, Alex, and good morning. My name is Paul Arndt with LifeSci Advisors. I would like to thank you for participating in today’s Cytomedix third quarter 2013 earnings conference call. Joining me from Cytomedix are Martin Rosendale, Chief Executive Officer; and Steve Shallcross, Chief Financial Officer.

Here is a brief outline for today’s call. First, Martin will provide an update on the recent partnership with Arthrex, AutoloGel reimbursement status and launch activities, and research and development activities. He will then hand the call over to Steve who will provide you with a summary of the third quarter 2013 financial results. Finally, Martin will conclude with an outlook for the remainder of 2013 before opening up the call to questions.

After the market closed yesterday, Cytomedix announced financial results for the third quarter 2013. If you have not yet received the news for this -- the news or if you would like to be added to the company’s distribution list, please call LifeSci Advisors in New York at area code 646-597-6992 and ask for me Paul Arndt.

Before we begin today’s call, I would like to caution that comments made during this conference call will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Cytomedix.

Actual results could differ materially from those projected. I encourage you to review the company’s filings with the Securities and Exchange Commission, including without limitation the company’s Form 10-K and the most recently filed 10-Q which identifies specific risk factors that may cause actual results to -- or events to differ materially from those described in the forward-looking statements.

Furthermore, the content of this conference call contains time sensitive information that is accurate only as of the date of this live broadcast, Wednesday, November 13, 2013. Cytomedix undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

I would now like to turn the call over to Martin Rosendale.

Martin Rosendale

Thank you, Paul. Good morning, everyone, and thank you for joining us. I’m Martin Rosendale, Chief Executive Officer of Cytomedix. Before turning the call over to Steve Shallcross, our Chief Financial Officer, who will update you on our financial results for the quarter, there are four areas I’d like to address.

I’ll give a brief review of the recent out-licensing of our Angel System to Arthrex. I will explain where we stand with reimbursement for AutoloGel by CMS and our expectation. I would give an update on the plans for AutoloGel launch in the wound care market and I will spend the September announcement regarding the reorganization of our R&D operations.

Regarding the Arthrex transition, during the earnings call in August, we announced our new strategy to focus all our commercial resources on the U.S. wound care market. In parallel with this, we announced the five-year exclusive world-wide licensing agreement with Arthrex for the commercialization of our Angel concentrated PRP system.

Arthrex is a privately held medical device company with an excellent track record and they are acknowledge as a global leader in marketing and new product development in orthopedics.

We are retaining ownership of Angel that had granted Arthrex exclusive world-wide rights to market the product. In exchange, we received an upfront payment of $5 million and are now entitle to royalties on gross sales which are in the mid-teen range.

Prior to this deal we established market acceptance of the Angel system and successfully achieved the solid growth pattern for sales of the product. A decision to partner Angel was driven by our conviction and our observation that there is a bigger opportunity in the hands of the larger established company with the commercial resources that are necessary to rapidly grow Angel while providing the growing and reliable royalty stream for Cytomedix.

Just three months since we executed the deal, I am happy to report the transition to Arthrex has gone very smoothly and they have already added new customers. While we are still responding to a few customer calls, Arthrex is now taking primary responsibility for Angel sales and distribution. We are very excited to have Arthrex as a partner and are confident they would be able to maximize the global potential for this best-in-class product.

Moving to the AutoloGel reimbursement status, with our renewed focus on the wound care market, our efforts now are dedicated to the commercial launch of AutoloGel under the Coverage with Evidence Development program and working with CMS to ensure the product has appropriate reimbursement.

We announced early in July that CMS issued proposed payment regulations under the physician fee schedule and the Hospital Outpatient Prospective Payment System, which represent two distinct segments of the market. In the physician offices, CMS have proposed a Medicare administrative contract to determine the payment amount for AutoloGel based on the claims and invoices submitted by healthcare providers.

This effectively allows the individual contractor to determine the level of reimbursement and for us, this means we now have access to the segment of the market with product pricing that is economically viable. The Medicare beneficiaries suffering with chronic wounds, it means that they now have access to AutoloGel treatments in the doctors’ offices.

In an analysis of a 5% sample of the Medicare claim’s database, 42% of all wound debridement procedures were performed in the physician’s office. Nearly half of the available market and newly acquired access the physicians’ offices through CED, represents a significant opportunity for AutoloGel. Our data collection processes for CED have been adapted for the physicians’ office site of care and we are actively selling into this market today.

With respect to the hospital outpatient or HOPPS payment rules, the recent government shutdown has delayed the CMS release to the final rules from early to late November. CMS has publicly announced the final rule to be issued on or before November 27. And CMS HOPPS’ officials have contacted us directly to confirm our receipt of that announcement.

The payment rules initially proposed by CMS in July provided only limited reimbursement which presented continuing commercialization challenge by preventing access for Medicare beneficiaries in outpatient clinics. However, we have since requested that this proposed rule be revised in order to allow for reimbursement that is economically viable for hospitals.

So Medicare beneficiaries are not denied access to AutoloGel. Specifically, we recommended that AutoloGel ambulatory payment classification be permanently reassigned or line it with procedures that have comparable, clinical and resource requirements.

During the quarter, together with key opinion leaders, we have submitted public comments to CMS providing additional support for an appropriate payment classification. We also had face-to-face meetings with CMS representatives to explain more fully the resource requirements for AutoloGel use and why they requested change as appropriate.

CMS has informed us they now have all the information required to make a final and fully informed decision on AutoloGel reimbursement. We believe that CMS will agree to an appropriate payment in its final rule that is expected within the next few weeks and believe that a favorable outcome is consistent with the goals supporting the previously issued National Coverage Determination for AutoloGel.

We’ve had a number of interactions with CMS and in our opinion that that appears to see this as a valuable opportunity to better understand the optimal and mutual care provided to Medicare beneficiaries in the room care space. Links to the CMS National Coverage decision memo and our public comments on the proposed HOPPS payment rules are available on our website.

Assuming the upcoming HOPPS payment decision from CMS provides a reasonable reimbursement rate. The commercial launch for AutoloGel proceeding in a stepwise fashion beginning with wound care physicians in the community, Long Term Acute Care hospitals and with the Veterans Health Administration hospitals. We are also targeting other government health organizations to fully leverage our current position on the federal supply schedule.

By focusing on these large, important and underserved markets, we expect to be able to meaningfully expand the number of patients treated with AutoloGel. We will continue to lay the groundwork for launching the hospital outpatient market and plan to undertake a major launch in wound clinics beginning in January, 2014.

We have completed our market assessment. We continue to develop launch strategies by focusing on key high density markets that we believe will offer the greatest revenue generating options. We currently have nine people on our sales organization which includes seven account executives and one [VA] specialist.

In addition, I’m excited to note that we have also retained senior marketing consultant who has a proven track record of launching product into the wound care space. This is some one who I believe to be one of the top professionals in this specialty and one who has demonstrated the ability to successfully navigate this market.

For the favorable CMS outcome, we expect to double the size of our experienced device and biologic sales force during 2014 to accommodate the growing number of AutoloGel treatment sites. We continue to see specialized partners to support our sales and promotion plans and anticipate that demonstration of market acceptance will drive those partnership discussions.

Regarding the R&D reorganization, we announced in September that in line with our strategy to build a profitable and successful wound care company, we are reorganizing our research and development activities. This decision was made following a thorough reevaluation of our assets and review of our business capabilities.

As part of this initiative, our ongoing financial support of the current RECOVER-Stroke trial and the underlying ALDH Bright Cell technology will be substantially concluded as of the year-end. We are exploring a range of strategic options that will potentially allow these clinical programs to move forward beyond 2013 and minimizing the ongoing investment at Cytomedix.

This decision along with the licensing of the Angel system I described earlier is expected to substantially reduce our cash burn, and allow us to focus our efforts exclusively on AutoloGel, and a significant opportunity we believe exists in the chronic wound care market.

Now, I would like to turn the call over to Steve for an overview of the quarter. Steve?

Steve Shallcross

Thanks, Marty. Total revenues were $3.4 million in the quarter ending September 30, 2013, compared to $1.8 million recognized in the same period last year. The increased was primarily due to a one-time, nonrecurring sale of $1.3 million for existing, placed Angel centrifuge units to Arthrex in connection with the Arthrex agreement we announced in August.

Product sales excluding the sale of existing Angel centrifuges to Arthrex decreased by $72,000 to $1.6 million. Decrease in disposable sales was primarily due to a reduction in the Angel average selling price, partially offset by an increase in sales volume.

Our contractual selling price to Arthrex under the Arthrex agreement was significantly lower than our historical average selling price. In addition to product sales, we recognized an increase of $188,000 in royalty revenue, $129,000 in transition services revenue and $67,000 in license fee revenue from the Arthrex agreement.

We mentioned in the third quarter of 2013 and beyond, we expect sales of Arthrex centrifuges and disposable products to decline following our licensing agreement with Arthrex. We expect the impact of these pass-through sales to be offset by an increase in related royalty revenue.

Overall, gross margins decreased to 15% from 43% for the quarter as compared to the same period last year. The decrease was primarily due to the sale of existing placed Angel centrifuges to disposable products under the Arthrex agreement. The sale of existing Angel centrifuges and related cost of sales to Arthrex were recorded at book value resulting in a zero-margin sale.

Since the Arthrex agreement became effective, all Angel product sales are sold at a contractual transfer selling price significantly lower than our historical average. This has had a negative impact on Angel margins and will likely continue for the duration of the Arthrex agreement.

The decrease in margin was partially offset by the gross margin realized from license fee, royalty and other revenues. However in future, Arthrex royalty revenue will have no associated costs. For a detailed explanation and a profitability of product sales and the impact of the Arthrex agreement, I refer you to the tables published in our Form 10-Q filed with the SEC yesterday.

Total operating expenses in the third quarter were $5.1 million, compared to $5 million in the third quarter of 2012. Salaries and wages in the third quarter were $2.0 million compared to $1.7 million reported last year. The increase was primarily due to additional employees we hired support increased operational activity and $139,000 related to reorganization charges.

Consulting expenses were $400,000, down from $100,000 from the prior year. The decrease is primarily due to lower stock-based compensation expense for stock options issued to consultants in 2012 related to the Aldagen acquisition.

Professional fees increased $49,000 to $400,000 during the quarter, due primarily to higher clinical trial related legal fees. R&D expenses were $900,000 compared to $1 million we reported in the same period last year.

The decrease was primarily due to lower costs for manufacturing and design fees related to the revision of an Angel disposable product. This was offset by increased costs for the development of the CED protocols for AutoloGel as well as cost related to sourcing and testing of the Angel centrifuge replacement components.

General and administrative expenses increased $53,000 to $1.4 million during the quarter. The increase is attributed to higher employee benefit costs and marketing expenses related to AutoloGel, which were offset by decreased investors and investor services and stock-based compensation expense.

Other expenses for the quarter were approximately $400,000 compared with income of $400,000 reported in the third quarter of 2012. The difference is primarily due to non-cash charges for the change in fair value of derivative liabilities and the net increase in interest expense and debt issuance fees related to various financing activities in 2013. We reported a net loss to common stock holders of $5.0 million or $0.05 per share for the quarter. This compares to a net loss of $3.8 million or $0.04 per share in the prior year.

Turning briefly to the operating results for the nine-month period ended September 30, 2013. Total revenues were $8.1 million, compared with $8.5 million in the same period last year. This was primarily due to a decrease in license fee revenue of $3.2 million offset by increase product sales of approximately $2.3 million, royalties of $267,000 and transition service revenue of $129,000.

Overall gross margin decreased to 32% from 67% for the nine months ended September 30, 2013, as compared to the same period last year. The decrease is primarily due to the license fee recorded in 2012 that had no associated cost or revenue. The sale of products under the Arthrex agreement at a contractual selling price significantly lower than the historical average and the sale of the existing placed Angel to Arthrex at book value.

Total operating expenses for the first nine months were $16.9 million, an increase of 30% over the $14.9 million reported in the same period last year. The company recorded a net loss of $15.4 million or $0.15 per share for the nine-month period ended September 30, 2013 compared to net loss of $16 million or $0.20 per share in the same period last year.

Cash used in operating activities for the nine months ended September 30, 2013 was $8.1 million. Cash and cash equivalents were approximately $4.6 million at September 30, 2013 and there were approximately 105.4 million shares of common stock issued and outstanding as of the end of the quarter. Marty?

Martin Rosendale

Thank you, Steve. In summary, we are positioned Cytomedix to succeed in the wound care market. We have licensed Angel to an international industry leader in orthopedics. As a result we expect after sales growth and a consistent royalty stream.

We have taken steps to reduce our cash burn and we will continue to do so in support of focusing our time and attention on AutoloGel and the wound care market. We are building a professional team of experienced sales executives and supporting them with top marketing talents in the industry.

Recently, I received a letter from long time investors of Cytomedix. In the letter they asked one question, when do you expect Cytomedix to achieve profitability? While we have not provided that specific guidance yet, the actions and strategy outlined this morning are focused on that goal. AutoloGel has consistently demonstrated healing rate that are superior to other advanced technologies for the management of chronic wounds.

1992 decision by CMS do not cover related products which created a challenging market barrier has been reversed for AutoloGel. We now have a National Coverage Decision which provides access for Medicare beneficiaries treated in their physician’s office and the final payment rule for the outpatient clinic setting is due out (inaudible). We are positioning Cytomedix to take advantage of these developments.

With that, I’d like to open the call up to questions. Alex?

Question-and-Answer Session


(Operator Instructions) The first question comes from the line of Jason Napodano from Zacks.

Martin Rosendale

Good morning, Jason.

Jason Napodano - Zacks

Good morning, guys. How are you doing? Let me ask a question a little bit about the gross margins, as I can try to better understand the accounting and what’s going on there. The -- your existing inventory was sold to Arthrex essentially at cost or products that are already sold that you had deferred -- essentially deferred revenue on were sold to Arthrex because I am a little confused is how that went down?

Steve Shallcross

Yes. There is two components to that, Jason, and this is detailed, a little bit more thoroughly in the Q, but essentially for the quarter about $1.9 million of the $2.9 million in revenues for products related to the sell through of product Arthrex had essentially book value or cost, okay. And of the $1.9 million, $1.3 million of that is related to existing units that were already placed with customers that were sitting on our books as fixed assets and being amortized over the use of life of those assets.

About 200,000 related to new machines that we sold through the Arthrex at cost and about 400,000 of disposable products primarily inventory that was sold through Arthrex at cost. On a go-forward basis, you should expect to see is that we are essentially going to be booking pass-through revenues for centrifuges and products to Arthrex and then you will see corresponding royalty income that will be booked on the top line related to those sales when they ultimately sell through to the customer.

Jason Napodano - Zacks

And those pass-through revenues are essentially going to be offset by cost below the revenue line?

Steve Shallcross


Jason Napodano - Zacks

It is at equal cost, so zero to zero margin?

Steve Shallcross

Yes. They are essentially pass-through at cost.

Jason Napodano - Zacks

Okay. There is no transfer; there is no markup transfer on the manufacturing?

Steve Shallcross

No, there is a small sliver but its, your assumptions should be that they are pass through at cost.

Jason Napodano - Zacks

Okay, I see $2.1 million in deferred revenue to Arthrex listed on the balance sheet, can you explain is that essentially the sales that Arthrex is generating from, because I'm just confused that's the kind of the account?

Steve Shallcross

No. I can appreciate that, so there is a lot of moving pieces. So included in the $5 million upfront that we received from Arthrex, about $1.3 million in total was for existing units that were recorded as fixed asset on our books. An additional $1.7 million or so is related to 200 units that were pre-negotiated, that will be sold through at essentially cost. So the remaining $5 million in upfront, you have a difference of $2 million, that $2 million will be treated as deferred licensing revenue amortized evenly over five years.

Jason Napodano - Zacks

Okay. Okay. I think I followed it now.

Steve Shallcross

If you have further questions, we could have further discussion.

Jason Napodano - Zacks

Okay, you know as far as, just trying to get a sense of the profitability of AutoloGel, now that obviously it's overshadowed by all these transactions going on with Angel and Arthrex, but you guys aren’t breaking out actual sales of AutoloGel. And so let me ask a question with respect to AutoloGel in the third quarter and the gross margin there because if AutoloGel is the story going forward, it’s a little difficult to kind of get a sense of the metrics and the profitability of AutoloGel when it's kind of being masked by massive sales of Angel products at zero cost. So anything you could try to speak to about AutoloGel in the quarter and the gross margin on AutoloGel sales.

Martin Rosendale

Right, so for the quarter AutoloGel sales were about $116,000 and our gross margins on the disposables had been running historically in the neighborhood of about 75%.

Jason Napodano - Zacks

Okay, okay that’s helpful to see -- again it kind of shows the go-forward what we can expect there. Let me kind of turn to a big picture about the wound care market and then we will kind of whittle it down to you guys in AutoloGel. The CMS decision that’s coming with respect to reimbursement that you said is coming potentially on or before the 27th. Is that for all wound care products, I know CMS has proposed number of changes in terms of bundling or packaging, is that what’s coming at the end of the month, or you just specifically talking about the HOPPS with reimbursement with respect to AutoloGel?

Martin Rosendale

So, you are talking about the entire final payment rules, Jason. So the government shutdown essentially affected final decision memos from CMS. One of them is coming from the hospital outpatient group, but it’s the overall final decision -- it’s the 700 page document that affects all of the payment.

Jason Napodano - Zacks

Okay. So these are pretty significant changes and I read as a preliminary proposal, and I have also read some of the public comments and it’s interesting to see various companies line up on either side, Marty, I think I would appreciate your thoughts at least on the preliminary decision with respect to where CMS is going here, because it really does seem like from my point of view from kind of an independent point of view.

There are a number of products, number of expensive product that could be significantly disadvantage if the preliminary decision holds and I guess we’ll find out in two weeks, and a number of kind of lower costs products that will go from kind of secondary, non kind of products to almost now the new leading products based on packaging and essentially of the product in the procedure. So, I would just love to kind of hear your thoughts on that and the marketing kind of where you think CMS is ultimately heading?

Martin Rosendale

Sure, I’m going to come up short of giving you a prediction, exactly what CMS is going to put out with respect to that in the final rule but I will give you my sense of where they are headed and what I see happening. What CMS called packaging, most of us would probably call bundling in that. They are seeing opportunity when a group of products have the same clinical utility or clinical indication, and don’t have clear differences in efficacy or therapeutic effectiveness. Basically the premise is put them all into one bucket or one payment classification and let the market sort it out. And that will drive cost savings for the payer in this phase to government, Medicare.

This is a trend you want to call it that that CMS has been pretty forward for quite a while. It certainly came out in our discussions with them, particularly when we got into discussions with the coding group about the product code that will be used for our claims for AutoloGel. And it’s my belief that the CMS will ultimately go down this path, not only for wound care product but for a lot of products that they pay for. They will continue to package product that they perceive to have similar clinical utility, and then let the market sort out which products will be used based on cost reimbursement profitability and so on.

As you probably saw from the public comments, this has steered a lot of discussion and debate, particularly in the wound care space given what they proposed as far as the packaging some of the dermal substitutes. My expectation is that ultimately, this will happen and the packaging will happen.

I suspect that there will probably be some delays but I don’t know that issue. I think the reaction to the proposed rules was pretty strong, so CMS is probably considering exactly how they want to get to their final position of packaging these products. But ultimately it’s my belief the consultants that we work with, their belief that clearly CMS wants to head down this path and we’ll eventually get there.

Jason Napodano - Zacks

Can you give us a sense of the procedure, the cost of the procedural reimbursement for AutoloGel, and whether or not AutoloGel is profitable to the physician under the proposed, what’s called packaging price or whatever reimbursement, whatever they suggested looks like $875, some along those I can’t remember exactly what the reimbursement number was? But can you give us a sense of the economics for AutoloGel under that preliminary decision?

Martin Rosendale

So, first, let me get back and explain what things we are at. So what we’ve done and the key preliminaries are supporting the use of AutoloGel, have supported in their public comments. The Ambulatory Payment Classification or APC, which groups these products together, does gain 0135. That payment classification is the one that’s CMS proposed for the dermal substitutes.

We believe that we could have demonstrated the CMS that the resource requirement for preparing AutoloGel, for fine AutoloGel is very similar and fits into that Ambulatory Payment Classification, that’s the APC that has an average payment of -- I don’t remember exactly but it’s about $875.

In that scenario that covers the cost of AutoloGel, and it provides a good payment for the position that will make AutoloGel very competitive in the marketplace today. To the extent that CMS packages other products into that same Ambulatory Payment Classification and again places this on an even playing field with the intent of winning the market and sort things out, we would do very well in that environment.

Jason Napodano - Zacks

Yeah. There is a number that’s obviously leading wound care products that are probably twice that cost or more, maybe even three times that cost. So where they I just -- from my point of view I can’t figure out how those products are going to survive if they are put into that 0135 like you suggested. You ultimately, do you think that CMS is kind of heading to the route where instead of paying on the procedural basis, they are paying for essentially an outcome, healing the wound and you get one flat fee to heal the wound as opposed to come back and keep doing procedures until -- and we’ll keep paying for that until we decide to try something else?

Martin Rosendale

Yes, I think that’s really I’d like to be Jason that getting there is a pretty complex proposition and it requires a number of the wound care treaters or healthcare providers for treatments to cooperate and negotiate those rates.

There is an interesting demonstration project. It was going on in the Netherlands right now with a key opinion leader with the name of Peter Edwards, what he is doing exactly that he has opened a wound care clinic that he manages and he has negotiated with the government payers there, a fixed payment amount and this projects has been going on for about two years now. And it’s working very effectively.

We’re fairly far away from that in the U.S. right now. I don’t see that happening certainly not in 2014 but I do believe it is where CMS and frankly other peers would like to get, the paper outcomes versus individual treatments.

Jason Napodano - Zacks

Yes. And just final question just on this topic then I’ll jump out and see if anybody else is on the line. What is your guys -- obviously we’ve got the HOPPS decision coming, we’re hoping that that gets altered, take you out of level two debridement to where you need to be. What is the fall back there Marty if that comes back and it’s not what you hoped for if they keep you where you are now or they put you in something else that just doesn’t seem economically viable?

Martin Rosendale

Sure, so if that affects half the market, right and so it’s definitely an important decision for us. And there are wide range of possibilities. We believe that we make a very strong case. We’ve used the same the same criteria and process if CMS goes through when they make these decisions. We brought in appropriate consultants to make that case. And so we believe we’re optimistic that we’re going to give a decision that will work effectively for AutoloGel.

Now -- and to your question, it gets pretty complex, Jason, because again there are wide range of possible outcomes here right in sort of paying numbers. And then within those ranges, we talked about APC 0135 and that has payment of $875. That is truly an average payment and it varies widely across different regions in the U.S.

So what we will need to do is, if CMS comes out and gives the payment decision then it’s different from what we’ve requested. We’ll need to analyze it quickly, assess what reasons of the U.S. would be paid at, reasonable rates and what regions will not and then from their make a decision about how we take AutoloGel forward to success. So I can’t answer your question directly this morning. We really wait and see what they come up, what they come back with and then run an analysis.

Jason Napodano - Zacks

Okay. Thank you. I appreciate you entertaining all my questions.

Martin Rosendale

Yeah. Thank you, Jason.


Thank you. Our next question comes from the line of Scott Pittman from Calton & Associates.

Martin Rosendale

Good morning, Scott.


Scott, go ahead, your line is live in the call, is it possible your line is on mute.

Martin Rosendale

Scott, was that you, I think somebody was talking over you.

Scott Pittman - Calton & Associates

Yes. Yes. Good morning. My question is getting to basically future capital need?

Steve Shallcross

I guess, the way I answered that question is that, the company is exploring all options, we will continue to explore all options and there is nothing definitive at this point, but want something has been identified, we’ll surely gain a position and disclose that.

Scott Pittman - Calton & Associates

Are you there?

Martin Rosendale


Scott Pittman - Calton & Associates

What I’m trying to understand is on the Lincoln Park agreement and past equity raises, it appears that you’ve behave in a way that goes back to the same people in essence as a private placement, although its public? And when I look at the Lincoln Park agreement, it appears that the Lincoln Park agreement is structured so that you -- and then as an investment banker. What I look at is what hurts in these future orders is the lower you get your stock at the lower price the more cost your equity is, what are you doing and what are your plans to get that equity rates at higher number, so that the financing is much cheaper and less dilutive to existing shareholders?

Martin Rosendale

Look, Scott, that works into all of our analysis and strategy when we’re looking at our capital requirements and capital raises. I mean that’s our objective right to raise capital at the highest possible prices and avoid the dilution that you are referring to with respect to existing shareholders. So, I really, can’t be more specific other then I understand what you are saying and it works into all of our analysis in strategic planning with respect to capital.


Thank you. We have no further questions in the queue at this time. I’d now like to hand the call back to Martin Rosendale for closing remarks.

Martin Rosendale

Thank you everybody. As always, I appreciate your support and I appreciate you joining the call this morning and look forward to speaking with you again in a couple of months. Thank you.


Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.

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