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Executives

Lynn Pieper – IR

Dick Johnston – Chairman

Mike Hooven – Founder

Andy Wade – VP, Finance

Analysts

Michael Dinerman – Piper Jaffray

Jason Mills – Canaccord Genuity

Chris Lewis – Roth Capital Partners

Robert Markison – Leerink Swann

Charley Jones – Barrington Research

AtriCure Inc. (ATRC) Q3 2012 Earnings Call November 1, 2012 8:30 AM ET

Operator

Good day ladies and gentlemen and welcome to the Third Quarter AtriCure Incorporated Earnings Conference Call. My name is Jodie, and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will be conducting a question-and-answer session. (Operator Instructions).

I would now like to turn the conference over to your host for today Lynn Pieper, AtriCure Investor Relations Consultant from Westwicke Partner. Please proceed.

Lynn Pieper

Thank you, Jodie. By now you should have received a copy of the earnings press release. If not received a copy, please call 513-755-4136 to have one emailed to you.

Before we begin today, let me remind you that the company’s remarks may include forward-looking statements. These statements include, but are not limited to, those that address activities, events or developments that AtriCure expects, believes or anticipates, will or may occur in the future, such as revenue and earnings estimates, other predictions of financial performance, launches of new products and market acceptance of new products.

Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure’s control, including, but not limited to, the rate and degree of market acceptance of AtriCure’s products, governmental approvals, and other risks and uncertainties described from time-to-time in AtriCure’s SEC filings.

AtriCure’s results may differ materially from those projected on today’s call. AtriCure undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, we may refer to non-GAAP financial metrics. A reconciliation of these non-GAAP measures is included in our press release, which is available on our website.

I would like to remind everyone on the call today, that the Food and Drug Administration, or FDA, has not approved certain AtriCure products for the treatment of atrial fibrillation or AF, or for stroke reduction. The company and others acting on its behalf may not promote these non-approved products to train doctors for the surgical treatment of AF, or stroke reduction unless the product is so indicated.

These restrictions do not prevent doctors from choosing to use the products for the treatment of AF or stroke reduction, or prevent AtriCure from engaging in sales and marketing efforts to focus only on the general attributes of the products for the current cleared uses. AtriCure educates and trains doctors in the proper use of its products and related technologies, including for the treatment of AF in accordance with the products specific indication.

With that, I would like to turn the call back to Dick Johnston, Chairman of the Board at AtriCure.

Dick Johnston

Thank you Lynn. Good afternoon and welcome to AtriCure’s third quarter 2012 conference call. Joining me today Michael Hooven, one of AtriCure’s founders and board members; Andy Wade, Vice President of Finance and Mike Carrel, just announced as AtriCure’s President and CEO.

On today’s call I will provide an overview and then turn the call over to Mike Hooven who will provide a review of business trends, our strategy for capitalizing on our AF approval and an update on our clinical trial progress. Andy will provide more detail on our third quarter financial results and finally, we will open the call for your questions.

Before we begin, I’d like to address the announcement that we made this afternoon that Mike Carrel has joined AtriCure as President and CEO. Mike was most recently President and CEO of Vital Images which was publicly traded on NASDAQ, acquired by Toshiba in 2011. Under his leadership Vital Images grew revenue and profitability, increased global market share, expanded his presence to over 90 countries and raised over 100 million in equity financing. We’re pleased to welcome Mike and look forward to his leadership and expertise in further developing and executing our strategy here at AtriCure.

Over the past few months, Mike Hooven and I have worked closely with the management team and employees at the company to carry out a strategic and operational priorities. We have great people who are all committed to our growth and success. I appreciate their support and the support of our partners and associates during this transition time.

I'll turn the call over to Mike Hooven for a more detailed update on business trends, the strategy for capitalizing on our AF approval and clinical trial progress. Mike?

Mike Hooven

Thank you Dick. Good afternoon and thank you for joining us. I also would like to take the opportunity to welcome Mike Carrel to our team. Mike brings a solid track record of establishing strategic vision, expanding businesses internationally and driving revenue growth and subsequent profitability. We look forward to his leadership and contribution here at AtriCure.

Turning to business trends. We are pleased to report that in the third quarter, US open heart revenue including AtriClip was up 11% compared to the same period a year ago. We believe that this is evidenced that our investments and strategic priorities are building momentum and resulting in sustainable growth opportunities.

In the US, procedure trends have remained generally stable throughout the third quarter despite a typical seasonal slowdown and we continue to experience strong growth trends from our international markets which are up 17% versus prior year on a constant currency basis.

We are continuing to capitalize on our investments in support of our AF approval through education activities designed to increase awareness and improve patient outcomes. We initiated our first training and certification event in January of this year and to date, we have trained 569 cardiac surgeons up from 377 surgeons we've reported last quarter.

We are successfully expanding this program which as we anticipated is resulting in increased utilization, competitive share gains and cross selling opportunities. Training levels are strong and conversions are proceeding as expected. But the cycle time from training to the sales process has been slightly longer than anticipated due to the increased focus and time on product value analysis at hospitals. This modest increase in conversion time coupled with seasonality in Q3 led to a bit of weakness. We have worked through this effect of this longer cycle time and did not see it impacting us in Q4.

In addition, MIS sales were affected by one month delay in the release of our new Coolrail product to some surgeons were delaying procedures in anticipation of release. The product is now available on the market.

Separately, MIS sales were also impacted by one month delay in the start of our DEEP AF trial which is now underway.

The training and certification proceeding ahead of schedule, our new Coolrail product available and on the market and the start of our DEEP AF trial, we see both open and MIS trends picking up in the fourth quarter.

Operationally, we embarked on several initiatives in the third quarter and to cost savings and improving efficiencies. Our operations group has done a great job of implementing a series of initiatives which have significantly reduced scrap rates year-over-year. A number of other key cost savings initiatives are underway that should favorably impact our gross margin over upcoming quarters.

We launched two new products in the third quarter that we are particularly excited about. First, we launched our next generation articulating robot friendly clip applier called BOA Pro. We believe the BOA Pro is ideal for a minimally invasive right lateral thoracotomy approach used in minimally invasive bowel procedures which is a growing opportunity. We recently concluded our initial limited launch and early feedback has been extremely positive and we are preparing for an open release this month.

We are submitting a supplement to the FDA to include BOA Pro and ABLATE II and anticipate using it in our initial cases. The Boa Pro carries a significant ASP premium versus its predecessor.

Secondly, we also launched our next general Coolrail product in the third quarter. Recall that the original Coolrail was taken off the market in mid-2011. In retrospect, this was not the right decision as it led to several surgeons holding off a number of MIS procedures in anticipation of the release of a next generation version.

Our next generation Coolrail has been designed with improved usability and we anticipate supporting the growth of our MIS procedures with this product.

Moving to an update on our clinical programs. We continue to invest in clinical science and FDA approvals. In mid-September, we announced FDA approval of the ABLATE post approval study or PAS. This landmark tree year, 350 patients study is intended to build additional evidence of the safety, efficacy and long term durability of the AtriCure Maze IV incumbent treatment for AF using AtriCure’s proprietary surgical devices.

The initial FDA approval study ABLATE reported 84% of patients free from AF at six months following Maze IV treatment and 75% of patients free of AF had a mean follow-up of 22 months when assessed by 48 hour ultra-monitors. The AtriCure Maze IV procedure is normally performed at the time of a primary open heart procedure where access to the heart is routinely established.

The ABLATE and PAS studies focus on the most difficult to treat chronic forms of AF known clinically as non-paroxysmal AF. The chronic AF patient group represents roughly half of the diagnose patient population and has been extremely challenging to manage with conventional medical therapy or catheter ablation.

Our data suggests that currently only three in ten cardiac surgery patients with an AF diagnosis are receiving an AF procedure and only one in 10 receive a complete AtriCure Maze IV procedure. We expect the PAS study will provide additional compelling evidence of the benefits of the AtriCure Maze IV procedure and we are committed to making it the standard of care.

We call it with the minimum of 75 patients included from ABLATE AF. We have roughly 275 patients of the 350 remaining to enroll. We initiated enrollment in October and have 84 patients enrolled. The patients will be followed for three years.

Moving to the stage DEEP AF feasibility trial. We initiated enrollment in DEEP AF in September in two sites. We continue to work with the additional four sites to obtain IRB approvals and expect this to be completed in the current quarter. We have enrolled three patients to date which is in line with our expectations.

As previously communicated, this feasibility study is expected to enroll 30 patients at six sites. Our most recent FDA discussions indicated a 30 day interim analysis with an acceptable rate prespecific adverse events would enable the company to move directly in to a pivotal trial. Our current plan includes a submission of an interim safety analysis and a pivotal trial protocol during the second quarter of 2013. We anticipate initiating enrollment of the pivotal trial in support of stage DEEP AF during the second half of 2013.

Moving on to ABLATE II. We are pleased to announce that we have finalized our clinical protocol for ABLATE AF II, submitted an IDE application with the FDA in the third quarter and we have received conditional approval. We expect to receive FDA approval to begin the study during the current quarter and to initiate enrollment during the first half of 2013. Recall that ABLATE AF II is a single arm pivotal trial enrolling 117 patients. This clinical trial is intended for patients that have failed single or multiple catheter ablation attempts. The FDA has indicated that it meets the criteria for a PMA supplement which could significantly reduce the approval time for a minimally invasive sole-therapy platform.

Turning to our stroke trial. As discussed in our second quarter call, we have placed our stroke trial on hold while we evaluate strategic priorities. We will continue to work on the development of a minimally invasive clip delivery system to be used in a sole-therapy procedure. We believe this sole-therapy procedure to reduce the incidence of stroke in patients for who long term oral anti-coagulation therapies contra-indicated could open up a large untapped market opportunity. We expect to provide further clarity on our clinical strategy for stroke prevention when we report yearend 2012 results.

In summary, we are making meaningful progress with ABLATE PAS, DEEP AF and ABLATE II. Our new product introduction continue to reinforce our reputation as an innovator in the field. We continue to train surgeons at accelerating rates which is beginning to drive increased utilization and market share gains.

I will now turn the call over to Andy Wade, our Vice President of Finance to provide more detail on third quarter financial results.

Andy Wade

Thank you Mike. For the third quarter of 2012, revenue increased 6% to $16.1 million. Revenue from product sales in the US was $12.4 million, an increase of 5.1% from the third quarter of 2011. Revenue from ablation related product sales in the US increased by approximately $400,000 to $10.8 million with an increase in open sales of approximately $700,000 and a decrease of approximately $300,000 in sales of products used in minimally invasive procedures.

US sales of the AtriClip system during the third quarter of 2012 were $1.6 million as compared to $1.4 million for the third quarter of 2011. When looking at the open ablation business along with the AtriClip system, revenue increased $900,000 or 10.6%. International revenue grew 9% on a GAAP basis and 16.7% on a constant currency basis as compared to the third quarter of 2011 up to $3.8 million. The increase in international revenue was driven primarily by growth in Europe.

Gross margin for the third quarter of 2012 was 71.6% as compared with 72.8% for the third quarter of 2011 and 69.6% for the second quarter of 2012.

Similar to what we have described for earlier quarters, the year-over-year change in gross margin was primarily the result of investment in manufacturings and quality systems to transition and maintain the manufacturing of PMA approved products and to support our expanding operations. Along with a small portion driven by the continued increase in the mix of international sales along with an increase in the placement of capital equipment.

We continue to be highly focused on establishing enhanced operational processes to drive increased efficiencies and lower product costs. We have seen a decline in manufacturing scrap and are encouraged by the programs that are being introduced into our manufacturing and quality systems.

Operating expenses increased 14.7% or approximately $1.8 million from $12.3 million for the third quarter of 2011 to $14.1 million for the third quarter of 2012. Sequentially, operating expenses were flat.

Research and development expenses which include clinical activities were $2.9 million for the third quarter of 2012 and $3.1 million for the third quarter of 2011. The decrease was primarily in clinical activities as there were heavier costs in the third quarter of 2011 in preparation for the FDA panel meeting held in the fourth quarter of last year.

We expect clinical costs to increase modestly in support of our key initiatives, namely the post approval study, DEEP AF and ABLATE AF II. SG&A increased approximately $2 million with $700,000 due to the charges taken in conjunction with the departure of our CEO in September and the remaining increase driven primarily by an increase in selling, marketing and training costs.

Our operating loss for the quarter was $2.6 million as compared with approximately $1.2 million for the third quarter of 2011. Our adjusted EBITDA loss was approximately $950,000 compared to $100,000 for the third quarter of 2011.

Our net loss per share was $0.16 for the third quarter of 2012 compared to $0.07 for the third quarter of 2011. Approximately $0.04 of the current year loss is attributable to expenses related to the departure of the company’s CEO in September.

Now turning to a few balance sheet items. We ended the quarter with $13 million in cash, cash equivalents and investments. Additionally, we had approximately $5 million of borrowing capacity under the revolving portion of our credit facility. We believe our current cash position will support the execution of our strategic plan.

Lastly, as an update to guidance. We are planning to reinstate formal guidance for 2013 when we report our year end 2012 results and Carrel has had some time here at the company. In the interim based on current trends we anticipate top-line growth for the fourth quarter of 10% to 12% year-over-year on a GAAP basis and gross margin to be consistent with what was reported in the third quarter. At this point I would like to turn the call back to Mike for closing comments.

Mike Hooven

Thank you Andy. Overall we’re pleased with our third quarter performance and commend the team at AtriCure for staying on course through a transitional summer. We expect growth in the fourth quarter to be driven by stable procedural volumes in the U.S. and overseas, enrollment DEEP AF, new product introductions and ongoing training and education initiatives.

We continue to see healthcare reform trends impact our industry which is moving to a model where positions are rapidly becoming hospital employees. We believe that AtriCure is well positioned to capitalize on these trends as the only company in the industry with an AF label.

Strong education and sole therapy platforms. We’re the only company in the world with an FDA approval to treat the most serious forms of Atrial Fibrillation. We believe that AtriCure is uniquely positioned for worldwide growth in this increasingly challenging healthcare environment. To conclude I believe that team at AtriCure is in good hands and I have confidence in our people. We have a strong management team and a board that is committed to continuing the trajectory of success and increasing shareholder value. We welcome Mike Carrel’s leadership to further develop and execute our strategy. We will now open the call for your questions.

Question-and-Answer Session

Operator

(Operator Instructions). And your first question comes from the line of Thomas Gunderson from Piper Jaffray. Please proceed.

Michael Dinerman – Piper Jaffray

This is Michael Dinerman actually for Tom. First let me congratulate you Mike on joining the company. If I could ask you a question it would be can you tell us little bit about what in the due diligence that you did major particularly excited about this opportunity?

Mike Carrel

It was actually pretty simple I met the managed team, the board and I really like the strategy they put together. Over the last three months, Mike Hooven and Dick have really crystalized that strategy, put a focus on the right areas of the business and they continue to invest in both the products and innovation and also the search for the customers and I really like that and I saw huge opportunity from market potential as well. I mean the native (ph) market is a tremendous market, I have been studying it for quite some time, have been working with cardiologist for the last 5 years and it has become a really, really critical disease, stay (inaudible) treat and that was something I got really excited about. So you combine all those things together, a combination of the team, the board and the market opportunity that’s what got me excited.

Michael Dinerman – Piper Jaffray

Okay great and then do you guys have an update on the CFO search?

Mike Hooven

Right now we have – I have to congratulate Andy Wade on the terrific job that he has done for the last six months and our financial houses is in great shape and we’re going to leave that decision up to Mike Carrel but there is no immediate urgency at this point and we wanted to leave that decision to Mike.

Operator

Your next question comes from the line of Jason Mills from Canaccord Genuity. Please proceed.

Jason Mills – Canaccord Genuity

So my first question has to deal with the Maze IV training and development of that market. Once again it seems you had another good quarter of training as referenced by the number of centers that have been trained on the Maze IV procedure but obviously the open-heart revenue was down sequentially. Could you talk about the cycle that exists between the time the docs are getting trained on the procedure and how long it's taking to sort of get purchase orders to start to ramp at those hospitals that have been trained where they had been trained in the past.

Mike Carrel

And that is actually the primary reason that the open sales came in a bit under expectations. This quarter is that cycle time is running a little bit longer that we expected, there is really two categories that we are looking at, if it's a current customer that is being trained and the condition already gotten an approval and the timeframe is essentially faster. In many cases increasing the utilization of AtriCure products for that customer, they may only use ablation products but with AtriCure Maze IV that also involves a cryo product. So there may be some additional training that that surgeon requires and in addition that surgeon needs to get comfortable with that procedure and so to drive increases in revenue at existing accounts. We’re looking at a cycle time that’s a little bit longer than we had anticipated really to start that ramp and so what we’re going to be looking at is a ramp where that surgeon is looking at increased utilization of our products and then building up their procedure volume.

The second case and this is something we have been looking at in a lot of detail because we initially started training with kind of the (inaudible) which was our existing accounts and our best customers and in the first quarter and second quarter we were transitioning to some competitive accounts and third quarter we have been training quite a few competitive accounts and the issue with the cycle time on a competitive account is it's a bit longer because first of all let’s say that surgeon is using competitive product comes out of the account and because of the new role that many surgeons are in where their hospital employees they don’t quite have the leverage that they use to have and that surgeon has to go through a value analysis at the hospital and so that value analysis does take some time and then we frequently they will require that surgeon to utilize let’s say two or three products and perform two or three procedures before we can actually sell product in that hospital and then once we get the okay to sell product into that hospital there is frequently some inventory that needs to be worked through.

So we are very, very enthusiastic about the progress that we are seeing in this training, we’re getting a very, very high conversion rate of competitive accounts but I do have to say we’re learning things about the training procedure and the process in the cycle time and I think the other thing to note is that our training itself has gotten a lot better in the last, in this quarter versus last quarter and it's better the second quarter than the first quarter, so I think you know all of those things look very good for the upcoming quarter and we feel extremely positive about the trends in our open procedures for the upcoming quarter based on the training and the conversion of accounts.

But it did result in some softness in this quarter for the open procedure.

Jason Mills – Canaccord Genuity

That’s fair but the point that your trying to make, it sounds like Mike is that you expect that this is a leading indicator of the growth that you could achieve not only in the fourth quarter but in 2013 so my follow-up question if that’s true is, obviously with your guidance when Dave left, can you generally speaking give us a sense for your plans or 2012. What do you think this market should grow and given that your training competitive accounts, what you think your share should do next year and also as a follow-up just your thoughts on potentially expanding to more markets internationally from a direct standpoint and thanks I will get back in queue. Thanks guys.

Mike Carrel

At this point as we stated I think in the initial part of the call, we’re not going to be giving guidance on this call for 2013, I will say that based on what we are seeing this month which has been very encouraging we feel comfortable putting out about a 10% to 12% top-line growth this quarter, it's based on strong trends and what we are seeing in October it's possible we can come at the high end of this range but we also have to factor in that we are seeing one less selling day in the fourth quarter and we don’t yet know the impact of Hurricane Sandy on our revenue in the North East.

Jason Mills – Canaccord Genuity

And what about the international market direct plans?

Mike Carrel

This has been one of our key initiatives to support our international market growth, we have about a 20% market share in Europe and so you compare to that what we believe is over 50% market share here, we think there is a significant potential to increase our market share in Europe. we have the MIS procedure over there is, that’s been done and we also are looking at new markets in Asia and specifically China and we’re looking as well at South America.

Operator

Your next question comes from the line of Matt Dolan from Roth Capital Partners. Please proceed.

Chris Lewis – Roth Capital Partners

This is Chris Lewis online for Matt, thanks for taking the questions. First Mike just wanted to congratulate you and walking you to the company there. Can you guys just discuss any disruptions the company may have seen during the quarter related to the transition just in terms of possible physician relationships, hospital relationships or just any sales force disruption or turnover the company may have seen.

Mike Carrel

Yes this is something that I have spoken a number of you about and I think I talked to Matt about this but it's been actually very surprising, to my knowledge have not lost a single account, we have not negatively impacted any surgeon relationships. In fact that’s going the other way for a few of them and we have seen in terms of turnover, we did, we have had no sales force turnover whatsoever and so this has been in terms of the key customers, the key accounts, their main question is are you going to continue to work with me and at this point we are saying absolutely.

Chris Lewis – Roth Capital Partners

And then I think you mentioned in your comments related to the training programs, but can you expand a little bit more and provide us with more commentary around the competitive market share gains you saw during the quarter.

Mike Carrel

I can’t give you actual numbers but I can tell you that the conversion of competitive accounts, I mean we look at kind of net conversions and we look at the number of accounts we have converted competitive accounts and then we subtract the number of competitive accounts. We have lost and we are doing extraordinarily well in converting competitive accounts and so we think this is going to pay some significant dividends and the only downside of that is the cycle time, is a little bit longer than we anticipate it.

Chris Lewis – Roth Capital Partners

Okay and then just last question here. The 10% to 12% is that for the fourth quarter, is that a year-over-year growth rate?

Mike Carrel

Yes.

Operator

Your next question comes from the line of Danielle Antalffy from Leerink Swann. Please proceed.

Robert Markison – Leerink Swann

This is Robert Markison, my congratulations on the new appointment. Just wanted to see if you have had time to assess your strategy if you’re going to continue with the current strategy or if there are different roads that you think you might take going forward.

Mike Carrel

Right now I have the chance to assess the strategy in the period of the time that I have been able through the interview process but I’m going to continue to reevaluate. I think they have got a strong (inaudible) just one of the things that actually attracted me to them and it turns the conversion with Mike and Dick but obviously there is always going to be things up for looking at over the course of the next 60, 90 days and I will give an update to everybody on the earnings call in the February timeframe.

Operator

Your next question comes from the line of Charley Jones from Barrington Research. Please proceed.

Charley Jones – Barrington Research

I guess my first one is around the sales force, I was curious are you how many reps do you have, how many managers do you have, are you still using kind of electrophysiology specialist and how many of those are there, are we all three in agreement of the sales level we need or what are some of the variant choices you have in front of you?

Mike Carrel

Right now we have somewhere in the order of 40 reps, about 10 management but 60% personnel on the field and we have looked at, we’re actually in the process and this is something that we are excited about having Mike onboard so he can evaluate this. We have had a strategic AF a couple strategic AF marketing managers who are have been very successful in driving referrals and converting accounts and training and so we’re evaluating, we believe we are sufficiently staffed, the question do we want to reallocate some of the support resources maybe to focus a little more heavily on our open procedure and our AF label.

Charley Jones – Barrington Research

Have you seen some of your Eps kind of slowdown on referrals as a result of days departure or is that same as the cardiac surgeons?

Mike Carrel

Not at all.

Charley Jones – Barrington Research

Just a couple of quick more, a couple of more. ABLATE II is that a minimally invasive or is that an open concomitant for these people who have failed previous catheter ablation.

Mike Carrel

ABLATE II is actually a very exciting study, and it's becoming more exciting because we believe we have a way to place our new clipped system with the new Boa Pro clip applier. It's a right lateral through economy, it's essentially the same procedure that is becoming the procedure choice for surgeons who are doing minimally invasive valves and what we are adding to that procedure is essentially all of the lines for the AtriCure Maze IV done under direct visualization.

So we anticipate the outcome and this is done on a stop heart with the Fem Fem Bypass. So we anticipate that the results of this procedure should be similar to our ABLATE, our results that got us FDA approval. We have a word from the FDA that this is eligible for supplemental PMA and when I talked about the ball Boa Pro clip applier. Just a few weeks ago, we had a surgeon used this product in one of our user studies took that surgeon a matter of seconds to apply to clip to the appendage. We’re in process of putting together some videos and if we have had a number of other surgeons do the same procedure and so we think the potential is not only and we are submitting an amendment to there tomorrow to the FDA to incorporate this clip into the ABLATE II trial and we believe there is not only selling opportunity to use this clip in this standalone procedure which is, the advantage of this procedure is it's very familiar to cardiac surgeons, any cardiac surgeon that doesn’t in minimally invasive valve knows this procedure.

So we have the advantage, and not only been able to sell due to this procedure but we can also sell the clip into minimally invasive valve procedures for any surgeon that wants appendage management for that procedure and the ASP for this product is significantly higher than the ASP for the previous system.

Charley Jones – Barrington Research

Just a one real quick follow-up it's about (inaudible) I was hoping you could be a little bit more specific about the differences, is it just a longer delivery device, or is there anything different and if you have the ability to go in minimally invasively here why the delay of the stroke trial given the potential value creation there and what is it that you’re waiting on product development or did you see something that was just going to be too difficult to get through the FDA, maybe you can talk a little bit about that stroke trial. It sounds like maybe even financing has something to do with it and I would be curious, Mike Carrel’s initial view on whether or not this company is properly capitalized.

Mike Carrel

That’s really like three questions but let me so you want to know the (inaudible) Boa Pro and the differences.

Charley Jones – Barrington Research

And why not stroke why delay in the stroke. It seems like it was related to capital.

Mike Carrel

Let me address the stroke trial first. The stroke trial is a huge undertaking and what we decided was that we do two things, one is we would look at really going if we’re are going to do the trail we have to go big in the trial and we want to look at an NIH funded trial. So we need to get serious NIH support for that trial. Second is since this is going to take some time to do that and we have had great success in developing our largest Boa Pro product, we would want to develop an even more minimally invasive system for delivering that clip. So when we do the trial we do it with NIH funding and with a significantly less invasive product than the one we already have.

Now to answer your question about the Boa Pro there is quite a few differences from the existing system, the first difference is that the surgeon was required to cut the (inaudible) to release the product from the delivery part of the mechanism so in the Boa Pro it's a very simple system where the (inaudible) are simply released by pulling on a piece on the handle. You extend that piece and the clip is released and also and this is why this product is being – we’re so excited about this for the wide lateral for economy procedure, the head of the product that contains the clip can be articulated in anyone of the axis.

So it's posed to the previous product where you can only rotate that in one axis. The third thing is it's really bio-friendly. We have designed it to be grasped by a robotic grasper. So and the fourth the ASP is significantly higher, we believe we can command a much higher price for this product.

Operator

(Operator Instructions). At the present time you have no further questions. I would now like to turn the call back over to Mike Hooven for closing remarks.

Mike Hooven

Just like to thank everybody for joining us. We’re really excited about the future of the company going forward under Mike Carrel’s leadership and look forward to our next earnings call. Thank you.

Operator

Ladies and gentlemen that concludes today’s conference. Thank you for participation. You may now disconnect. Have a great day.

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