Robert Gershon - Chief Executive Officer Jay Ewers - Interim Chief Financial Officer Jack McCarthy - Chief Commercialization Officer.

Dave Turkaly - JMP Securities Charles Haff - Craig-Hallum Russell Cleveland - Renn Cap Glen Rudiger - Trust Management Bill Chapman - Morgan Stanley John Sheen - Private Investor.

Good morning and welcome to the Bovie Medical Corporation Third Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. Hosting today’s call will be Robert Gershon, Chief Executive Officer of Bovie Medical Corporation. After today's presentation, there will be an opportunity to ask questions.

Please also note this event is being recorded. [Operator Instructions] Before we begin, I would like to make the following Safe Harbor statement. Today's call will relate to Bovie's third quarter 2015 earnings results and will contain forward-looking statements regarding predictions about future events.

Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected.

Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.

The company assumes no obligation to update or supplement any forward-looking statements, whether as a result of new information, future events or otherwise. With that, I would like to turn the call over to Mr. Robert Gershon. Please go ahead sir..

Thank you, Andrew. And thank you all for joining us this morning to review our third quarter results and discuss key developments across our organization. With me today are our CFO, Jay Ewers; and our Chief Commercialization Officer, Jack McCarthy. At the end of our prepared remarks, all three of us will be available to answer questions.

This was an excellent quarter for Bovie Medical from several perspectives. We reported a double digit increase in total revenues compared to last year’s third quarter. J-Plasma sales were higher than the last two quarters combined and each of the metrics tied to future J-Plasma sales showed substantial sequential growth.

Additionally, the recent progress we have made on three key initiatives has further strengthened both our core business and the potential for J-Plasma. Specifically, we reported a 15% year-on-year increase in total revenues and gross margin that was stable with the adjusted gross margin we reported in last years’ third quarter.

The profitable growth of our core business has always been an important objective for us and we are continuously exploring opportunities to build our product portfolio and increase efficiencies. The big news of the third quarter, however, was J-Plasma.

And as I said in the earnings release, we believe we have reached an inflection point in terms of positive sales momentum. First, our J-Plasma sales surpassed $500,000 and we have closed in on the $1 million mark for the first nine-months of this year. Of course the numbers are relatively small, but the trends are undeniable.

After sales, the metric that we watch most closely is generators in use, as it has the closest co-relation to actual sales and is a good indicator of future recurring revenue from hand piece sales.

In the third quarter, we had 62 generators in use at 53 hospitals in 18 states, representing an 82% sequential increase over the 34 that were in use at the end of this years’ second quarter.

The install base is comprised of generators that we have sold or leased to hospitals where J-Plasma has been VAC approved, as well as generators that we have placed in hospitals where J-Plasma has been VAC approved or is still under VAC review.

In the case of latter, we charge a premium for the disposable hand pieces as part of the program that allows hospitals to pay for the use of a generator without having to purchase any capital equipment. Placing the equipment on site has proven to be one-way to shorten the sales cycle and increase the number of surgeons who are exposed to J-Plasma.

At the same time this has resulted in disposables representing a greater proportion of our J-Plasma sales than they generally would at this early stage of commercialization, which is fully aligned with our strategy of growing recurring revenue. 62 generators in use gives us the scale to effectively mind our installed base.

Being on site, puts us in an excellent position to increase adoption amongst surgeons with access to our generators and broaden awareness within the institutions were J-Plasma is already VAC approved or in review, while continuing to expand the universe of surgeons who are using the product.

At the end of the third quarter, there were 132 surgeons using J-Plasma and 74% sequential increase achieved in just a three-month time horizon. Also, we are very proud of the fact that all surgeons who have been trained by us on J-Plasma have emerged as users of the product.

As we have noted previously, there is a lag time between the time, the surgeon begin using J-Plasma and when that translates into bulk purchase orders from their hospitals. This is due to the longer approval process at value analysis committees or VACs a situation that is not going to be medical specific, but rather confronting our entire industry.

One mechanism we have to capture these sales is via Scrub POs, which are issued when the surgeon is using the product in the OR, while it is under VAC review.

With the timing of VAC approvals increasingly unpredictable and the significant amount of paper work required following approval Scrub POs have become another accurate early indicator of future sales.

In the third quarter, we received 79 Scrub POs, almost double the 42 we received in the first six months of this year, bringing the total for 9 months to a 121 compared to just 6 for all of last year. And while we are frustrated by the time it takes to complete the VAC reviews, we cannot complain with the treatment that J-Plasma is getting from them.

We were approved by 17 VACs during the third quarter, bringing the total VAC approvals up to 59 year-to-date and J-Plasma was under review by an additional 64 VACs. The VACs at two large systems have deferred approval requiring that we publish ongoing clinical studies prior to their approval, but except for those two we are batting nearly a thousand.

Taking all of these metrics together, it is clear that we are positioned for substantial growth in J-Plasma sales in the periods ahead, with the vast majority of demand coming from OB/GYN and plastic surgery, which has been our initial target markets.

Last quarter, I discussed the formation of a medical advisory board to assist us in determining those specific procedures in other surgical specialties for which J-Plasma is well suited for broad-based adoption. Our first member, Dr.

Vip Patel, a world renowned urologist and leader in robotic surgery believes that J-Plasma has the potential to significantly benefit patients undergoing surgery for prostate cancer. One of the strategic initiatives I mentioned earlier is the progress we have made in building out the Medical Advisory Board.

The two new surgeon members we announced in our third quarter earnings release are at the top of their fields, Dr. Husam Balkhy, is director of robotic and minimally invasive and cardiac surgery at the University of Chicago Medicine; and Dr.

Robert Cerfolio, is Professor of surgery and section chief of thoracic surgery at the University of Alabama Hospital. Doctors Balkhy and Cerfolio see multiple ways in which J-Plasma can become the standard of care for certain procedures within their respective specialties of cardiovascular and cardiothoracic surgery.

In addition to expanding J-Plasma’s addressable market, we believe that expanding from OB/GYN and plastic surgery into specialties like these will accelerate the hospital VAC process. All three medical advisory board members have been working with us on J-Plasma and have collectively completed many labs and surgical cases using the products.

In short order, we expect to expand the board to 6 to 9 members. Another strategic action we took since our last earnings call was to purchase Bovie, Bulgaria, our R&D and manufacturing contractor base in Sofia.

This transaction gives us control over an important part of our product development activities and supply chain and we project that it will result in net cost savings of approximately $850,000 for 2016 and 2017 combined. And lastly, we continue to execute our strategy to unlock the value of the Bovie R&D pipeline.

In the third quarter, we announced the receipt of FDA clearance for 6 new hand piece configurations that extend the J-Plasma pistol grip product by offering additional instrument length and adding a new needle option.

The longer length allow greater surgical reach and the needle enables even more precise delivery of energy giving the surgeon added control around vital organs. Just a few days ago, we received FDA clearance for our next J-Plasma product extension, which is branded, precise, 360.

This J-Plasma hand piece has a reticulating tip that will enable surgeons to navigate structures that are out of the reach using a straight laparoscopic device.

And the next J-Plasma portfolio addition on the drawing board is a hand piece design specifically for use in robotic surgery, which we expect to launch in the second half of next year, and we look forward to collaborating with our Medical Advisory Board members to develop other new J-Plasma product configuration.

Jay will be reviewing our third quarter financial performance in just a moment. I do want to comment however on the fact that we kept our administrative and other non-revenue generating cost in check in the third quarter and have allocated our resources to those areas where we see meaningful growth potential.

We succeed in maintaining our cash position at $13.2 million just modestly below the $14.1 million in cash that we had at the end of the second quarter providing ample funds to support the commercialization of J-Plasma. At this point, I will turn over the call to Jay Ewers for a financial review of our third quarter results.

Jay?.

Thank you, Rob. Revenues for the third quarter was 15.2% $7.8 million, compared with $6.8 million in the year ago quarter. We saw continued growth in the core business, the expected pickup in OEM sales from existing customers and more than $500,000 of J-Plasma revenue, up from $90,514 a year ago. Gross margin for the quarter was 41.3%.

Stable with the adjusted gross margin figure, we reported in the third quarter of 2014, which excluded certain inventory charges. Our margins have remained in-line with expectations, but this quarter we recorded a large sale of lighting, a product that is relatively low margin and where orders tend to be large, but irregular.

Going forward, we still expect gross margin to be in the mid-40s range. Third quarter operating expenses rose 17.6% to $5 million. Approximately 80% of the year-on-year increase in operating expenses represented additional spending on R&D and the commercialization of J-Plasma. I’ll now go into more detail on the OpEx number.

R&D cost grew 58.4% to $583,000. As we've discussed before, we greatly expanded the R&D capabilities in terms of headcount and expertise. In the last 12 months, we rolled out multiple new products, including the Bovie Ultimate generator and six new J-Plasma hand piece configurations.

Professional service costs were $427,000, compared with $142,000 in the third quarter of 2014. This increase largely consisted of expenses associated with legal and accounting fees for due diligence and advisory services related to our recent acquisition of Bovie, Bulgaria and outsource tax and compliance work.

Salaries and related costs totaled $1.9 million, an increase of $275,000 from the year ago quarter. Similar to previous quarters, the higher salaries, benefits and payroll taxes reflected the increased headcount in the J-Plasma sales force and other key hires. SG&A costs were flat from a year earlier at $2.1 million.

Increases in sales commissions and sale related T&E were offset by decreased spending in regulatory, non-sales related T&E and other administrative expenses. We expect operating expenses to remain relatively flat at this level in the coming quarters.

The exception will be marketing and advertising expenses and variable compensation from J-Plasma sales, which is forecasted to increase. The operating loss for the quarter was $1.8 million, compared with $2.4 million in the third quarter of 2014.

Turning to below the line items, we recorded a non-cash gain on the valuation of derivative liability from $266,000 in the third quarter, compared with a non-cash loss of $1.7 million year earlier.

As you know, we executed a transaction in the first quarter to convert Great Point Partners preferred shares to a similar security without warrants and certain preferences. This transaction reduces the volatility of below the line expenses.

The net loss attributable to common shareholders on a GAAP reporting basis for the third quarter was $1.6 million, compared with $3 million loss a year earlier. Looking briefly at year-to-date results, revenue was up 5% for the first nine months of 2015 with solid growth in the core business and J-Plasma.

Gross margin was 42.6%, up from 32.4% in the first nine months of 2014 when we booked significant inventory adjustments. Total operating expenses are up 38% year-to-date to $14.7 million with higher expenses in most categories as we build the foundation to support growth in J-Plasma and the core business.

Our operating loss was $5.6 million year-to-date, compared with $4.1 million in the first nine months of 2014.

The net income attributable to common shareholders on a GAAP reporting basis was $9.8 million, compared with a loss of $12.8 million in the first nine months of 2014, also related to the revaluation or extinguishment of derivative liabilities. Turning to the balance sheet, it remains largely uneventful.

We ended the third quarter of 2015 with $13.2 million of unrestricted cash and we are actively working to conserve our cash position providing us with the resources to fund the ongoing J-Plasma commercialization. I’ll now turn the call back to Robb for closing comments..

Thanks Jay. We are well on our way to the strong second half that we anticipated at the time of our second quarter conference call. The pickup in core business materialized in the third quarter, and we expect to see continued progress in the fourth quarter.

And J-Plasma's performance metrics set the stage for continued positive momentum all indicating a strong finish to 2015. In 2016, we expect to continue to achieve steady progress in our core business.

We are allocating resources to develop new products and assess products developed by third parties, which we can bring to market through our efficient distributor network. The Bovie brand is an important competitive advantage and one we believe we could leverage further.

At the same time, we expect our revenues to reflect a greater contribution from J-Plasma sales as we penetrate our installed base and continue to build surgeon adoption in both our current target markets and the high profile neurology, cardiovascular, and cardiothoracic surgical specialties.

In summary, we believe we have built much of the foundation for sustainable and scalable growth. We have the transformational product, a clear roadmap, the right surgeon advocates, and a motivated and committed sales and management team. At this time Andrew, we would like to open the call to questions..

We will now begin the question and answer session. [Operator Instructions] The first question comes from Dave Turkaly of JMP Securities. Please go ahead..

Thanks and congrats on the J-Plasma momentum.

I guess quickly, you mentioned of VAC process and I was just thinking with the new medical advisory board members that you have, I mean once you get through a VAC process in any given hospital, you have evidence that you will be able to get surgeon from different specialties to use the product say you guided in first originally through a gynecological surgeon, could these cardio and thoracic people then also use it once you are through the VAC.

.

Yeah. Dave thanks for the question. It’s Rob and I certainly invite Jack to add any additional color. The answers are resounding yes absolutely.

In fact, what we have experienced at several accounts is once the hospital approves the product and it starts getting used by our initial target such as OB/GYN there are conversations that ensue in the surgeon’s lounges and there tends to be a viral effect where we have other specialties approaching us to help them adopt the technology.

We have several examples of that and we’ve been very diligent remaining focused on only our target specialties. We’ve had other specialties that are not targets that would like to start using the product, but to keep the organization focused is absolutely paramount. So, we use that level of discipline, but many examples of that happening. .

Dave, I’ll add to that as well. This is Jack. One of the things that we are leveraging the VAC members for is to make sure that we have the right procedures for those specialties. The MAB members.

And with that as soon as these procedures are identified, the sales team will be able to go to the existing installed base and go after those specialties that you just referenced the CV and thoracic. So that will be a strategy moving forward to go in and leverage the existing base..

And in summary, once the product is approved at the hospital for purchasing all surgeons have access to requesting that product, once it’s approved..

Great, thanks for that and I guess just give an update on your headcount in you J-Plasma sales force, where it is and where it’s going?.

Yeah, thanks for the question. The answer is we’ve held steady with our headcount, which includes 16 sales professionals and that includes the territories, as well as the sales leadership team and as we’ve commented in the past everyone is a coach and a sales professional. So everyone is selling the product.

At this point in time, we have not expanded our sales organization beyond those numbers, but we certainly have plans to do so.

Our discipline is to make certain that we can serve or cast position so that we responsibly grow the organization and this is a balancing act and it is not only a quantitative exercise there is an art to it as well, so we are beginning to understand how long it takes for a sales rep to become very profitable and then of course we can start increasing accordingly, but there is also an art to it as the sales team is really coming together and jellying and we want to expand it and really start scaling accordingly.

So, we will comment more on our plans in our next earnings call with respect to 2016 and beyond, but growth is our plan. .

Thanks a lot..

The next question comes from Charles Haff of Craig-Hallum. Please go ahead..

Hi thanks for taking my questions guys.

Question for you on the metrics and the trajectory of the J-Plasma metrics, so it seems generally speaking like we saw similar levels of sequential growth of VACs going from 42 approvals to 59, under-review going from 46 to 64, J-Plasma physicians going from 76 to 132 and generators in use 34 to 62, so they all kind of have the similar level of sequential growth thereabouts, and I am just wondering if you could kind of characterize the quarter and are these different metrics in this similar level of sequential growth, is that an anomaly or is it just a coincidence or is that a function of your resources, your sales resources and would you kind of expect these levels of growth to be seen in the fourth quarter, just help us understand or characterize this quarter as a respect to those metrics..

Okay, thanks Charles. It is a very thoughtful question, and the growth that we’re seeing, the sequential growth across all metrics is very consistent with our 2015 goals and certainly the trajectory has us on track by the end of the quarter, of quarter four that is, to meet our 2015 goals that we established.

It is a function of the level of sales activities that are taking place. That’s what it is.

So, this sequential increase is not a surprise to us, it is what we expected based upon the activities that has been building really since January and given this elongated sales cycle of upwards of 6 to 9 months, it is reflective of the work that has taken place 6 to 9 months ago and the level of activities have only increased quite significantly throughout the year.

So, we do expect this trajectory to absolutely continue in Q4 and beyond..

Okay. And Jack maybe you can chime in here, all of these metrics kind of had a similar level of growth.

Just on the second part of that question, I mean I know your win ratio is pretty high, so do you think it was co-incidence that all of these metrics kind of had a similar level of sequential growth or is it a function of kind of the sales resources that you’re deploying and so forth..

No, it is no coincidence, it is expected. This is going according to our plans and strategies and we have been employing throughout the entire year. So, no coincidence at all, this is all very expected and planned. .

Okay. And so if I think about the term backlog and kind of what you have in terms of Scrub POs VACs that are under review going from 46 to 64, I mean if I think about it in a backlog standpoint, it is going to take a long time for this backlog to burn off and you’re going to have new businesses and new accounts that you’re getting into.

So, do you feel like you have pretty good visibility or is your visibility improving on the VAC side or is it still random? I know that a lot of these VACs operate differently than one another, is there any predictability now that the numbers are getting kind of bigger now or should we still be a little bit cautious in trying to predict how some of these approvals take place on the VAC side..

I invite Jack to chime in as well, so I will just start. The level of POs that are coming through with which there’s an instinct gratification to those Scrub POs because we get paid back day for the product and the level of hospitals that are now going through the VAC process is a function of the high level of activities that are occurring.

We’re seeking and really successfully on starting to shorten that sales cycle by approaching the VACs through this multi-specialty process because that process has begun.

And that part is helpful and the ground swell of support that comes with Scrub POs that at times are for multiple specialties really helps the VAC committees efficiently make their decisions. These VAC committees are not all about saying no to everything.

They are all about going through a thoughtful process to control costs at their hospitals as we can assist them in their process, we shorten the cycle and our batting average really speaks for itself. So, we know - and that’s very helpful, so the momentum continues to build.

So, I don’t know if that completely answers your question, but I invite Jack to chime in as well. .

So, I think your question is, as far as the predictability, it’s still somewhat variable, hospital by hospital there is still no clear cadence of each hospital and when they’re going to order the product, but we do as rob said have an idea of how to shorten the sales cycle, the MAB and multi-specialty approaches is definitely one of them, as well as providing additional tools for the sales team out there to help shorten the sales cycle and we continue to learn throughout the year and as we learn from the customers and what the VACs are requiring we’re building more tools and more tactics against that.

So, we hope to shorten a sales cycle moving forward, but again there is no real consistent sales cycle per VAC, it’s still variable by hospital, by IHN..

I will make one more comment Charles regarding the Scrub POs, because I think they are such an important indicator.

When a VAC committee sees an increase in Scrub POs at their respective facility what it does communicate to them is that surgeons have decided to pick this battle to fight to get this product into the hospital and that’s a very important data point for the VAC committees because back in the old days whatever the surgeon wanted, the surgeon got.

Today, the surgeon will only pick certain battles for those must have products. So, I think these Scrub POs are a real strong indicator that what we have with J-Plasma is a must have product..

Yeah that is a great point Rob. I really appreciated that, but that makes a lot of intuitive sense, yeah thanks for bringing that point up.

Just a couple more quick ones from me here, sorry I joined a couple minutes late, but did you mention anything about the economic white paper, anything - has that been published yet or is that coming?.

So, I will make one statement and then I will turn it over to Jack to further elaborate. We said at the beginning of the year that we want to exit 2015 with collectively 10 plus white papers, including the one that you are referencing. We are on pace to absolutely meet that goal, but Jack I ask you to comment on..

Sure, we had not commented on that specific paper, but that paper is out there and it is helping generate more interest in approvals through the VAC, we will also publish additional economic papers next year as we continue to move forward and we’re also going to be moving into some clinical studies as well, which is important to again reduce the sales cycles.

In addition to white papers, we are working on clinical strategy as well. .

Okay and one last one from me, and if you don’t have the answer to this maybe I could get to this offline, 132 Docs using J-Plasma and at the end of the third quarter, do you have a breakdown of GYN cardio thoracic, any of the sub specialties that make up the 132 Docs?.

Yeah, so Charles we don’t publish that level of surgeon customer information very specifically, but we can share with you in general the vast majority are split between OB/GYN and plastic surgery.

There are a few other specialties that are sprinkled in there and we certainly expect, going forward as we expand into these other surgical specialties such as neurology, heart surgery, and thoracic surgery that the mix will start shifting as the number continues to grow. .

Okay, thanks for taking my questions guys..

Yeah, our pleasure..

The next question comes from Russell Cleveland of Renn Cap. Please go ahead..

Good morning and congratulations on a very good quarter, I’ve got two questions one is a technical question on number of shares moving from 17 million to 27 million, I’m assuming that’s 5 million from conversion of preferred and 5 million from the offering, is that correct?.

Yes..

So, it’s a conversion of the preferred is the other 5 million?.

That’s correct..

Okay. The next thing, earlier in the year, we had guidance on for example number of surgeons and things like that that we were expecting, we have an update of that we certainly are making a lot of progress, can you update your guidance in the areas that you have been getting guidance because I didn’t see it in the press release..

Yeah, absolutely. I alluded to it kind of lately just a moment ago, but some of the goals we talked about was having a 100 generators in use. We are on that trajectory by the end of 2015 that is, a 100 generators in use and 200 surgeons using the product as we exit the year. We continue to pace on that trajectory to meet those goals.

We do think that we’ll exit with those goals being met. We also commented and I just said it a moment ago, on the number of white papers we expect to have 10 or more that are independently published by the end of the year. We are absolutely going to meet or exceed that number.

We also mentioned an increase in key opinion leaders and this is before we announced the medical advisory board and we said that we would increase the key opinion leaders to 10 to 12.

We have far, far, far exceeded those numbers I think in the first half of the year and certainly we are going to exit the year with many, many, many more than those numbers. So, I think of course we will report in early 2016 or finish for 2015 and I expect when we do we will have met our goals..

Great. Okay that’s all I have. Thank you so much..

Okay Russell, thank you..

[Operator Instructions] The next question comes from Glen Rudiger of Trust Management. Please go ahead..

Hi Rob, my question is basically a little bit of what Russell asked.

The number of shares going from 17 million to 27 million and when we did that conversion of the issue that Craig Hallum did back in March as we ran the numbers it looked like we were going to eventually grow up to about 33 million shares, will there be more shares added in over the year period.

So does that conversion happen? Are we done at 27 million at this point?.

Yeah. So, we have the option overhang of course, which is about 27 million shares and the option overhang. Right now there is the weighted-average shares outstanding is 27 million.

Great Point Partners still has about, they can convert approximately another 4 million of their preferred - they have 1.975 million preferred shares at a 2:1 conversion rate. So that is a 2:1 so that could another 4 million of overhang, which puts us at about 34 million because we’re basically done with the placement agent warrants.

We have a few of those outstanding of 300,000. .

So, those numbers will start going into our reports after the conversions happen, but right now they’re just carried on the books as being there as not fully diluted at this point. .

That’s correct..

Has anyone else written a report on Bovie, I know JPM came out with a very good report back in April, I haven’t seen Craig Hallum come out with anything and we’re basically trading right now at 40% less than what the stock was when they did our secondary and we are supposed to be putting it in strong hands.

Do you have any feelings on what’s going on as far as any other reports on the company are concerned?.

Okay, Hi Glen, it’s Rob. Thanks for that question and right now we have two analysts that are covering us.

They are on the phone and asked questions already, JMP, as well as Craig Hallum and they do publish updated notes on a quarterly basis to keep their clients informed and as you would expect from an investor relations perspective I speak from an investor relations strategic perspective we continuously and very often at least quarterly have meetings the executive management team does with many other institutions that are very interested in our stories and what we expect over time is that other analysts begin to pick up the story because it is such a great compelling story and start doing research and publishing their research on us.

There is another organization, you may have seen their stories, and we have no affiliation with them.

In fact to my knowledge I don’t know that they’ve ever spoken to people, maybe historically they have, but it’s Seeking Alpha and they have put together some very interesting articles and again they’ve never contacted us at least not in my, coming up on two years of tenure, they’ve never contacted me personally directly or anyone from our leadership team, but they tend to publish very thoughtful and well researched and insightful reports.

So, you can look at those reports up. They do so quite frequently. I think there have been at least three of four in the last couple of years, including one very, very recently. .

Okay.

Is there an actual report out from Craig Hallum or just the notes that the analyst puts out?.

So, Craig Hallum has, when they first initiated coverage put out quite a comprehensive report and following some, I don’t remember the exact pages, but about 15 to 20 pages of a report that they put out, maybe even more and every quarter they do an update, which tends to be a 6 to 7 page report that they publish..

Okay.

What’s the best way to get access to those? Is it just on the web?.

It is best to connect directly with Craig Hallum and with JMP, they are completely mutually exclusive. So, we don’t have any ability to help facilitate those discussions, but just connect with them directly their contact information tends to be on the last page or the first page of their reports..

The next question comes from Bill Chapman of Morgan Stanley. Please go ahead..

Guys, good morning and congratulations on the fine quarter..

Thank you Bill.

You bet you.

I wanted to ask, I know we’re early in the ramp on the J-Plasma, but do you still stand by your metric that each generator has two surgeons doing approximately two surgeries a week therefore it is around 75,000 or somewhere in that range, annual sales?.

Yeah, thanks Bill for your question. And the answer is yes. There are so many different ways to model out how one would project sales of J-Plasma, but we stuck to that one. That’s the way we think about it internally.

We think about each generator generating $78,000 of recurring revenue from the disposable hand pieces and it’s exactly what you said Bill, it is two surgeons doing two cases a week, or four cases or week at a given, for each given generator that’s how the math works out to 78,000 and that’s essentially on balance what we are seeing and what we expect on a go forward basis..

Okay, now we had heavy vacations of course in August, which affected Q3 and did that affect the quarter, as much as it would most firms. .

Yeah, there is no question about it. August is a tough month for anyone in medical devices, for every organization and we are no different. So, I would say in my personal experience having been in this industry for a long time, I would say we experienced it in proportion like everyone else in August. .

Okay.

One last question on the Bovie Ultimate, you’ve got this three-in-one the bipolar, the monopolar and then the J-Plasma and are there any other functions you are looking to add to that?.

Absolutely, yes. This is part of what I was alluding to in the prepared comments..

Okay..

With respect to unlocking the value of Bovie in-part through our R&D pipeline.

You know, building generators is in absolute core competency that we have that we feel very strongly we do better than anyone and it is our heritage, it is the sweetest sweet pot we have and it is the reason why our OEM business is what it is where it is a100% in bound interest from the absolute largest players in the [industry/none] because we do this very, very well.

We have a big vision for evolving the Bovie Ultimate, it will be much more than a three-in-one as we continue to iterate and we’re not going to elaborate on it beyond that but do know we have a big vision and we have the capabilities to very quickly bring new products to market, especially when it comes to electro surgical generators. .

Okay, thank you very much..

[Operator Instructions] And we have a question from John Sheen, a Private Investor. Please go ahead..

Mr.

Gershon, my question to you is, at one of the conference calls you alluded to the fact that you were hoping to have a run rate of 2.5 million at the end of the fourth quarter is that still in effect?.

Yeah. So, we won’t comment on specific run rates at this time, but if you think about our model.

So, if you think about the model we just suggested with the 100 generators in use times a 78,000 you will get to math that does get to a run rate that is that exceeds the 2 million, I think, 2.5 million, So we continue to be on that trajectory, so I’m hedging a little bit because it is premature for us to give very specific financial guidance, but we are providing guidance on the metric and it is reasonable to conclude accordingly.

.

Okay. Now one last question, recently you signed a contract with the chain of hospitals, which have a lot of clinics attached to it, right..

You are referring to the Amerinet GPO?.

Right, right, right. Now, my question to you is this, when they sign up with you to use your product is that like an exclusive thing, in otherwise will they be just using J-Plasma or will they be using J-Plasma in conjunction with other products..

John, I’m going to make a general comment and very quickly kick it over to Jack. Jack is leading this effort on behalf of the organization.

In general GPOs have evolved historically from being an exclusive relationship with manufactures to now being non-exclusive where they open themselves up to have do what they call dual or multi-source contracts offering their members choice.

So, that is kind of at a very high level, what we have done, however J-Plasma is in a pretty unique situation and I will let Jack elaborate more on this contract and where it falls within how this GPO characterizes this technology..

Okay, thank you Mr. Gershon..

Sure. So Amerinet contracted with Bovie for J-Plasma and they actually created a unique category for J-Plasma as they review the energy they believe that it was so unique that they wanted to create its own category for J-Plasma.

So that being said, Amerinet is the only GPO this time that has a contract with J-Plasma or is it J-Plasma approved we’re selling into many hospitals that belong to different GPOs, but we have a contract set-up with Amerinet, they do have not only hospitals, but clinics and physician offices that can access the product as well and they have the ability to pull through our core products with that.

The core products are not on contract, but given that Bovie Ultimate is a three-in-one tool and as the previous person has suggested they can pull in the core products, the pads, pencils, and other accessories with the Bovie Ultimate. So, it can pull through additional business with it..

Okay, thank you so much.

Okay, our pleasure..

And we have follow-up from Dave Turkaly of JMP Securities. Please go ahead..

Actually, my questions have all been answered thank you..

This concludes our question and answer session, I would like to turn the conference back over to Rob Gershon for any closing remarks..

Okay, thank Andrew, and thank you all for participating in today’s call. We really appreciate your interest in Bovie Medical and look forward to keeping you informed on our process. .

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..