John Simpson - Founder, Executive Chairman Matt Ferguson - CFO Jeff Soinski - CEO Mark Klausner - Owner, Westwicke Partners.

Neil Chatterji - Cowen and Company Jason Mills - Canaccord Genuity Chris Cooley - Stephens.

Good afternoon, ladies and gentlemen. [Operator Instructions]. Please note that this call is being recorded today, Thursday, November, 3, 2016 and will be available one year on the investor relations section of Avinger's Web Site at investor.avinger.com. I would now like to turn the meeting over to Mark Klausner of Westwicke Partners..

Thank you all for participating in today's call. Joining us today are Avinger's CEO, Jeff Soinski; Founder and Executive Chairman, Dr. John Simpson and Chief Financial Officer, Matt Ferguson. Earlier today, Avinger released financial results for the third quarter ended September 30, 2016.

Before we begin, I would like to remind you that management will make statements during this call that may include forward-looking statements within the meaning of the Federal securities laws which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements. All forward-looking statements including without limitation our future financial expectations are based upon our current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

For a list and description of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission.

Avinger disclaims any intention or obligation except those required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. I'd now like to turn the call over to Jeff..

Good afternoon and thank you, all, for joining us. We're pleased to report that during the third quarter, we made good progress on the growth plan we outlined on our last call, achieving the highest quarterly revenue in Company history with $5.3 million for the quarter.

During the quarter, we increased our installed base by 17 accounts and are now selling into 143 Lumivascular accounts. Based on this continued strong performance and building our installed base, we're now very confident we'll exceed our goal of 150 Lumivascular accounts by year end.

We also increased catheter utilization within our Lumivascular accounts despite the typical slowdown in case volume experienced in the summer months.

During the quarter, we completed a significant equity financing which allows us to focus on continued execution of our growth plans as we continue to increase penetration of our Lumivascular platform and drive utilization of our proprietary catheters for the treatment of PAD.

Our recent successes underscore the progress of our sales force and our commercial leadership's ability to reignite momentum. Our recently appointed Senior Vice President of Sales and Marketing, J.D. Simpson, has focused his team on personal accountability and executional improvements in all areas of his organization.

We see continued progress in the fourth quarter and are confident these efforts will lay a strong foundation for growth in 2017. In the third quarter, the size of our sales force decreased modestly, but sales rep productivity increased.

At quarter end, we had 57 sales professionals compared with 59 at last update as we continue to refine our organization and provide greater focus on high opportunity markets. Looking forward, we plan to grow our sales force incrementally as we increase penetration in existing markets and extend geographical reach.

We expect to have a sales force in the low to mid 60s by the year end assuming we identify the correct high quality candidates in that time frame. Our sales force has done as excellent job leveraging our recent national agreements with the V.A. and HealthTrust Purchasing Group.

These agreements make the contracting phase of negotiations faster and more efficient. Even though the agreements just became effective in September, we were able to close an additional Lightbox sale within each of the V.A. and HealthTrust groups prior to the end of the third quarter.

While our sales team has been driving revenue growth, our R&D team has also made solid progress. We've launched new iterations of products that have been designed to respond to some of the physician input that we received.

We're proud of the rapport that we developed with our customers and will continue to nurture these relationships and build on this informed design process looking ahead. On our last earning's call, we said that we expected to launch a version of Pantheris with an enhanced plaque cutting capability.

In the third quarter, we completed market preference testing of this new device in 10 Lumivascular accounts. And based on positive experience in the clinic, we initiated commercial launch of this enhanced cutting device in mid-October.

We also recently received 510(k) clearance from the FDA recognizing Pantheris as a technology that can be used for diagnostic purposes as well as its primary use as a therapeutic device.

This speaks to the added value of the real time imaging provided by our Lumivascular platform and the important clinical information it provides to physicians during interventional procedures. Just last week, we announced the launch of our upgraded Lightbox imaging console, the L250.

This new console provides for deeper integration of our OCT imaging technology into the cath lab environment and streamlines processes with a touchscreen interface and simplified software workflow. Here again, we conducted a market preference test in five of our more active accounts in the third quarter.

And based on our experience in the field, we're confident this upgraded platform will contribute to improved performance, usability and reliability. Later this quarter, we expect to file a 510(k) application for an upcoming software release that will add vessel measurement capabilities to the L250 platform.

We believe this added capability will be valuable as we seek to enhance diagnostic applications and, over the longer term, build a case for incremental reimbursement for OCT diagnostic capabilities on our therapeutic catheters.

While we're very pleased with the improved robustness and clinical performance of our current version of Pantheris, we're also making rapid progress on a new version of Pantheris with an even more comprehensive set of new and improved features which deliver improved pushability and handling, an improved inclusion balloon, a longer nose cone option and longitudinal markers on the shaft.

We plan to submit a 510(k) application for this device in the first quarter of 2017. Turning to our below-the-knee atherectomy device, we're on track with our previously disclosed plan and we continue to expect to file a 510(k) application for this product in mid-2017.

This device has a lower profile than our existing Pantheris products and should enable greater penetration of the sizable below-the-knee market. I'd now like to ask Dr. Simpson to elaborate on our recent progress. And then, following Dr. Simpson's remarks, Matt will review our Q3 financial results and discuss guidance for 2016.

I'll offer some closing remarks and then we'll open the call for questions..

Obviously Jeff has done a really good job in summarizing Avinger's current state of affairs, if you will, in all relevant areas, so I'll just provide some additional perspective on some of our most unique and clinical R&D achievements. And thus, we'll have a little bit more time for question and answers.

From a clinical perspective, we're seeing an increased utilization of the current 7Fr Pantheris, although a surprise to me. In small vessels, most frequently those vessels are below-the-knee where imaging has been easier and more dramatic because of less blood interference.

So, as the vessels become smaller, they sit more snugly around the catheter and it improves the quality of the images with a less requirement for flush, if you will or removal of the blood. The high quality images have already shown to improve the safety profile for below-the-knee treatments interventions.

And I think that this - these will continue to improve as the devices get smaller which is happening as we speak. My opinion is smaller devices combined with a new, more efficient cutter that Jeff has just described and ongoing improvements in torque shaft performance and nose cone capacity will drive continued peripheral Pantheris adoption.

And ultimately, to me very important, leading to the coronary arteries and the treatment of coronary artery disease.

These technology enhancements along with new data from our collaborative study with the Highmark Health and the Allegheny Health Network, I believe, will be favorable in show of reduction overall radiation exposure and a reduction in adjunctive stenting. And these are two very important drivers of adoption for the Pantheris.

As the Pantheris is not contraindicated in ISR - I remind you of that - we're seeing remarkable outcomes with the Pantheris. When Pantheris has been used to treat in-stent restenosis, particularly in the SFAs. So, with that, I'll now turn the call back over to Matt..

Total revenue for the third quarter ended September 30, 2016 with $5.3 million, a 95% increase from the third quarter of 2015 and a 14% increase from the second quarter of 2016. Revenue related to Lightbox imaging consoles was $1.4 million, a 65% increase compared to the third quarter of 2015 and a 43% increase versus the second quarter of 2016.

Within the 17 Lumivascular accounts we added in the quarter, eight purchased Lightboxes and nine net accounts acquired a Lightbox through our rental or placement programs. Revenue from disposable devices was $3.9 million which was a 110% increase compared to the third quarter of last year and a 5% increase from the second quarter of this year.

Gross margin for the third quarter of 2016 was 30% which is down from 36% in the comparable quarter of 2015 but up from 22% in Q2 of 2016. The improvement compared to the second quarter of this year related primarily to reduced warranty costs and the higher gross margin associated with revenues related to Lightbox imaging consoles.

While the year over year decrease was mainly due to the growth of the Company's manufacturing infrastructure associated with the launch of the commercial introduction of Pantheris and a higher proportion of Lumivascular accounts participating in the company's placement-to-purchase and rental programs.

Operating expenses for the third quarter of 2016 were $13.0 million, compared to $10.8 million in the third quarter of last year. This growth was primarily attributable to the expansion of the Company's commercial organization and marketing expenses associated with the launch of Pantheris.

Loss from operations for the third quarter of 2016 was $11.4 million, compared to $9.9 million for the third quarter of 2015. Net loss for the third quarter of 2016 was $13.0 million, compared to $13.3 million in the third quarter of 2015. Loss per share for the third quarter of 2016 was $0.73, compared to $1.08 for the third quarter of 2015.

The decreased loss per share primarily reflects the issuance of 9.9 million shares in the Company's follow-on public offering which closed on August 16, 2016. Adjusted EBITDA, a non-GAAP measure, was a loss of $9.3 million for the third quarter of 2016, compared to a loss of $8.3 million for the third quarter of the previous year.

Turning to our balance sheet, cash and cash equivalents totaled $43.3 million as of September 30, 2016, compared to $43.1 million as of December 31, 2015. During the quarter we raised $31.5 million of additional capital through the follow-on public offering previously mentioned. Total debt at quarter end was $40.7 million.

Turning now to our financial guidance for the remainder of 2016, now that we have completed the third quarter, we're narrowing our range of anticipated revenues to $20 million to $21 million, representing year over year growth ranging from 86% to 96%, compared to our previous guidance range of $19 million to $23 million.

This expected range for revenue has caused us to revisit one of the covenants that exists in our current loan agreement with our lender, CRG. This agreement originally contained a set of revenue covenants that included a minimum revenue level for 2016 of $23 million.

Since this amount is above our new guidance range, we recently approached CRG to discuss an adjustment to this covenant and they have agreed to reduce this minimum revenue level to $18 million for 2016. CRG has also indicated a willingness to discuss adjustments to the revenue covenants beyond 2016 once we complete our 2017 budgeting process.

We sincerely appreciate the spirit of partnership with which CRG has conducted these discussions. We expect gross margin to continue to increase in the fourth quarter to the 40% to 45% range and this will translate to a gross margin for the full year in the low 30s.

We continue to expect adjusted EBITDA for 2016 to be a loss in the range of $40 million to $43 million. With the completion of our August financing, our basic undiluted share count now stands at 22.8 million shares which we expect to result in a weighted average share count for all of 2016 of 16.5 million.

Applying this new share count, we expect net loss per share for 2016 to be in the range of a loss of $3.28 to a loss of $3.46, compared to our previous guidance range of a loss of $4.35 to $4.55 which was based on a pre-financing share count of 12.8 million. And at this point, I'd like to turn the call back to Jeff..

For the balance of the year, Avinger will be focused on increasing utilization of Pantheris, making additional product improvements to Pantheris, training physicians in the benefits of our Lumivascular technology and continuing to improve the productivity of our sales force.

We're encouraged by the continued strong growth in new accounts which speaks of the appeal of our Lumivascular approach to the treatment of PAD.

We've implemented a plan to further penetrate and increase utilization in each account and while we continue to execute on our commercial and product development initiatives, we also remain committed to developing additional data proving out the clinical efficacy and outstanding safety profile of our Lumivascular platform.

We're very pleased to be back on track and excited about our path forward. In addition, we have several milestones ahead that I'd like to review. We expect to file a 510(k) application for adding vessel measurement capabilities to our new L250 platform later this quarter.

We plan to file for 510(k) clearance of our next version of Pantheris in first quarter 2017 and we plan to file for 510(k) clearance of our below-the-knee atherectomy device in mid-2017. In the clinical arena, we'll continue to make good progress in enrollment of the VITAL Study with interim data expected to be available in late 2017.

We also plan to submit an ID application for an ISR study -- in-stent restenosis -- early in 2017 and hope to begin enrollment in the first half of the year. We look forward to updating you on our progress and we'll lay out additional milestones for you for 2017 when we report our fourth quarter and full year 2016 financial results.

And with that, we'd be happy to take your questions..

[Operator Instructions]. Our first question comes from the line of Jason Mills of Canaccord Genuity. Your line is open..

Congratulations on the good quarter bouncing back from what you guys considered to be a difficult quarter in the second quarter. I have a few questions, Jeff. I wanted to start with the Lightbox placements and certainly getting those out is a leading indicator, your welcome tour of growing catheter sales down the line.

You're up over 50% inflations in the first three quarters of the year relative to where acted last year. I wondered if you could give us a sense for not only your pipeline of potential new Lightbox placements, but also the composition of the new placements you've brought on this year.

I think it's 48 in total this year now with this strong number in the third quarter.

How do they compare in terms of number of atherectomy procedures maybe per year, per month versus the 98 or 95 that you had in place last year?.

Yes, so obviously Jason, we're pleased with the way the sales force is developing not only our installed base but also their pipeline. This has been something that continues to be a strong emphasis from J.D. and his sales leaders to their people in the field -- to generate and qualify the appropriate leads -- to develop physician champions.

And to work through a very well-defined sales process to not only get the box installed but also to drive utilization once the box is in place and the training is completed. In order to drive that, we've increased our presence in the field by adding more clinical specialists which is a very efficient way to extend case coverage.

I don't have a direct comparison between utilization of new boxes versus past boxes because Pantheris was really new to everyone starting in March of 2016. So, even for folks who had been using our Ocelot catheter prior to launch, there was a lot of excitement and anticipation for our Pantheris atherectomy catheter.

And as you also know, there are many more atherectomy procedures than there are CTO crossing opportunities. So, we're pleased with the way utilization is building across our base. This quarter, we really didn't benefit from stocking orders or initial orders into our existing accounts.

All of our catheter volume was driven by either utilization reorders in accounts that already had Pantheris or the initial orders to the 17 new accounts we talked about.

So, I think good progress all the way across the board, real focus on targeting the right accounts and following up, launching those accounts correctly and driving and improving utilization. As we continue to not only get more experience with the device, our physicians the more they use it get more confidence with the device -- and as Dr.

Simpson has talked about on this call and past calls -- more comfort in going to more difficult anatomies, tougher legions, especially with the introduction now of our enhanced cutting device..

I guess I completely understand Pantheris launching March 1 last year. This time they didn't have the access to that particular catheter -- your technology.

But I'm curious, just last year versus this year or the progression over the last nine months -- relatively speaking when you're thinking about the accounts that you're selling a Lightbox or placing Lightbox in, in general for vascular procedures that they're getting, atherectomy procedures, just however you want to look at it.

As you're getting into these new centers, are they centers that are set in other atherectomy -- are they high volume, are they low volume? And then, as a follow up on the catheter utilization comment that you made, you've been kind of routing us with this quarter is out of the disposable revenue side, so I'm assuming the majority of that became Pantheris.

Is Pantheris the bestselling catheter in the product line at this point? In other words, are you doing more revenue on that then you are on Ocelot at this early stage?.

Yes, so the growth is driven by Pantheris. That really is the growth driver and that is the larger of the dispose to primary disposable device families.

As it relates to targeting, our group is primarily targeting facilities that are currently doing atherectomy, that do have a high volume of peripheral procedures and these are physicians who really buy into Dr.

Simpson's vision of providing a great luminal gain and therapeutic outcome without damaging the healthy artery and also frankly want to be empowered by visualization. And so, as we continue and you even see this with now our new diagnostic claim, that allows us to more aggressively train to the value of that visualization.

And so, again, to more directly answer your question, targeting more accounts that do have a high volume of atherectomy and peripheral procedures, that does not mean we aren't adding accounts who are interested in adding atherectomy.

Especially, we see a lot of interest from vascular surgeons who are drawn to the ability to see inside the vessel while they perform an endovascular procedure. And as Dr. Simpson has talked about many times and as I know with you specifically, Jason, is the extraordinary safety profile. This device is very differentiating.

So, if you can provide this aggressive gain in luminal flow but not damage the healthy artery, there's real clinical benefit to that that physicians recognize..

And then lastly from me, I'll get back in queue. For more due diligence, Jeff and John, maybe you could weigh in on this, the Pantheris catheter early days is being used a lot in complex lesions.

I think you've talked about this in the past in your launching a first study earlier than we thought presumably because you're seeing its use maybe by physicians of their own volition in those complex arteries.

Is it a case where given that there's three or four atherectomy reps in the lab, there's a lot of competition, that you're sort of being tested with the real hard stuff first and do you have confidence that if you do well with the harder lesions that perhaps you'll gain more share of the bigger part of the bell curve which is more of the easier lesions down the line? Just maybe give us a sense for what you're seeing in the field.

Thanks..

Yes, Jason, I would say that that is in fact the case. It's a very competitive space. We see a large number of competitive sales people in every one of our cases and I feel like that we're frequently relegated to some of the most difficult lesions.

The fascinating thing to me about what I'm seeing in terms of utilization is how often the physicians are making the decision to give this a try because of imaging and because of safety. And that particularly drives the below-the-knee technology.

A perforation below-the-knee is almost as bad as a perforation - well, not quite as bad as a perforation of the coronaries but it's worse than a perforation of the SFA. So, I think that we're seeing this safety profile drive and push utilization in sort of that direction that maybe might not have anticipated in our early goings.

And to see the seven first device which I still think is a little bit large being used in some very difficult anatomy down below-the-knee is really, I think, very reassuring but not only driven by safety because the efficacy's of course very important.

The neatest thing about what we do is that I think in our previous experience with some of the other technologies even dating back maybe to the early days of atherectomy in the coronaries with the DVI device, the deliver for us there was that we could frequently and follow up the patients.

We could see that our problems came from either not getting enough tissue or getting too much tissue and all of that was because we couldn't see what we were doing. And now that we can see what we're doing, the physicians can immediately gravitate toward getting sort of just the right amount.

So, we definitely avoid getting not enough, let's say or maybe more so not getting too much. So, that's how we're achieving the success that we've achieved so far. Of course, I expect you to get better and I think it will in the near term..

Our next question comes from the line of Chris Cooley of Stevens. Your line is open..

Just would like to follow on maybe a couple of points that Jason made there.

When we think about the increase in utilization that you saw in particular with Pantheris during the course of the quarter, could you maybe further characterize that for us a little bit? Are you seeing greater utilization within the existing operators, are you seeing more operators at those existing facilities utilizing the device? And then similarly, I think what maybe Jason was kind of getting at in one of his prior questions as well - you kind of took the gloves off at the end of the last quarter in terms of the types of lesions that you are openly - or should we say supporting use in.

Are you seeing broader utilization in the types of lesion subsets that you're seeing the Pantheris device utilized in the course of the quarter? And I've just got one quick follow-up..

Yes, so let me start with that and then we'll get Jeff to weigh in on perhaps maybe the kind of the business side of it.

But I would say that overall we're seeing more utilization of the current technology in lesions that are moderately - perhaps still not yet heavily calcified, but additionally0 fibrotic in lesions that would have been difficult to treat with some of our very, very first generation devices.

And yes, sometimes even the earliest generation device can cut calcium. It's the mystery of this disease process, right? We'd like to say that we're really smart and we know by a look at the angiogram exactly what's going on. We frequently do not, so I think that overall we're just seeing as physicians have more experience.

I'm not wording it very well, but there's something about just there's more comfort associated with knowing with certainty what they're actually doing.

To me, that's what sort of driving - but also to Jason's question, I mean, we're still so incredibly early with our experience that making gross extrapolations from the small numbers of the data that we currently have, you have to be really cautious in doing that. What I can say with absolute confidence is that we're growing. We're doing better.

We're seeing more adoption. Is it the Lightboxes that go out the - or we see a lot of cases the first day and how's that all changing. It's impossible with these small numbers to know exactly what that is. But I would say that with certainty, we've developed a foothold that is going to be very hard to displace us because of the safety profile.

If I can show you that you can go in and treat an artery and there's no chance that you're going to cut a hole in it that is going to get the attention of a lot of doctors over time. And I feel like that's where we're definitely headed. I have no numbers.

And Jeff, maybe you have some numbers on early installations of Lightbox and trends and things along those lines. And I don't have any numbers, but I will promise you that at part of it, in my mind, look good..

Yes, maybe just even to add a little bit towards the types of lesions that are getting treated is - I actually just heard our Chief Medical Officer, J.J.

Desai, taking about this the other day at TCT is that when you really look at a lot of the lesions where there's a lot of excitement to try Pantheris, it is in these more difficult cases such as in-stent restenosis because of the value of visualization to not interfere with the stent strats such as the CTOs, the lesion that's first crossed with our Ocelot device and stay inside the true lumen across the CTO.

And you're very aware, Chris, of the strong clinical data from the CTO subset that we generated as part of our VISION IDE trial. The popliteal, difficult anatomy where the visualization really adds a lot of value to a physician. So, we think that will continue to grow. And as Dr.

Simpson said, with the more comfort, the more usage, the more the device will be used in an even broader set of lesions. We also are making continued improvements on the device to make it even easier to use.

We have launched the L250 that has dramatically simplified the process of getting into a case with just touching a couple of buttons on the touch screen as well as better integration into the cath lab environment. So, this will all continue to build on itself.

But to answer your question about where is the kind of increase in utilization coming from and where is the growth coming from, I'd say it's really coming from two primary areas. One is increased utilization in our current Lumivascular accounts.

And the other is bringing on new accounts that have been well targeted and well trained and launched and prepared for using our devices for CTO crossing and atherectomy. And one of the things that I think we're all so very pleased with is how J.D.

has approached his leadership role from sales and marketing is really I'd say kind of two words; focused and accountability.

And focus on improving utilization in a current account by training, by bringing new users within the account, identifying new users and bringing them on board and getting them up to speed and by continuing to broaden the lesion set that current users are comfortable with. As it relates to new accounts, I think we've talked a lot about that already.

But it really all starts with proper targeting of accounts, removing impediments and barriers to entry and kind of speeding that process. That's one of the reasons we were so pleased with both the agreements that we put in place during the third quarter with the VA and the health trust purchasing group for HPG.

It accelerates that process and it makes it a much more straightforward from the time you still have to sell the account, get the physician champion, get the executive support. But then the negotiation of the terms and conditions and the pricing is much accelerated. So, we're obviously still really early in the process.

We're making improvements in our process, how we sell, continuing to improve the devices, continuing to learn from our physician partners. But we're really happy with the progress we're making and the trajectory we're on..

And then just lastly from me and I'll get back in queue. We were just a TCT. I know we met briefly while there. A little bit of noise from some of the existent players in this space with some new sizes and occasional new offerings there. But really no one coming to market with a disruptive technology like this.

I just want to I guess kind of throw this out there.

When you think about the very robust pipeline that you clearly have here now going into the end of this year and into early '17, the unparalleled safety profile, do you feel comfortable with the team that you have in place there from the sales and marketing standpoint and from an R&D perspective that you can push through this and hit these objectives as we start to basically just sustain the momentum that you've established here in this quarter.

I'm assuming the answer there is yes, but I just would like to hear some of your thoughts on maybe some of these newer offerings and how they do or don't alter the landscape. Thanks so much..

So, maybe I'll start on kind of the commercial organization and then turn it over to Dr. Simpson to speak a little bit about our developed and our R&D capability. But from a commercial side, as I said, we obviously took a little time to get our management structure right in sales. And we're very pleased with not only what J.D.

brought to the table right at the beginning of the quarter because of his past experience. And not only our - a PAD, but also specifically with Lumivascular.

As you saw, we brought down our number just a little bit in our sales force in the third quarter as we went through the organization and really chose and refined that organization by focusing on the players who we think can really be a bright part of our future.

We also tightened up a little bit the geographies we're in to make sure that we're focusing our resources on areas with the greatest potential so that we can drive deeper penetration, greater utilization in those areas and then build from there.

We now are in a process of building and bringing more folks into the organization, primarily grow really everyone we hire will be either territory sales managers or clinical specialists so they relate directly to increasing our case coverage capability. And we're being very picky as we hire these folks.

And there's a lot of interest, especially as we get more and more known and get more data out there and build our pipeline in being part of the Avinger team. So, I believe that we do have the right team in place. I think we'll continue to improve and grow it. We'll continue to train. They'll continue.

Many of our sales force just joined us in the very latter part of 2015 and early 2016. These people are now starting to get their stride, be very comfortable with Lumivascular image interpretation and it's a great solid base to build upon in a reasonable and measured way. I'll turn it over to John here in a moment.

But when you look at the way our pipeline has developed, I think that speaks very well of our R&D organization and the rest of the team here in our clinical group, our manufacturing operations group who really all work together to make these products happen..

Honestly I think Jeff's done a great job of summarizing that. And I suppose if I had to add anything, I would say that if we're bringing on the new sales people, that's always everybody understands that that can be a little bit difficult. Bringing on new engineers can be equally difficult.

The engineers that we get, none of them have experience with OCT guided atherectomy since no one has ever done that before. So, it's exciting in a way to bring on the really new engineers. They're all really young; looks like they're all about 12 years old to me. That tells you a little bit about how old I am.

But while it's exciting to see where these young people really become energized for doing something totally unique and treating patients with incredibly serious problems and making them better. That part is very exciting. We have two issues with recruited engineers. One, we compete with Apple. And they're just down the road, so that's difficult.

But also we're providing such a unique opportunity, particularly for the young engineers, that part is really exciting. And I think Himanshu Patel - he and I have worked together for a long time - would really support that conclusion. Would I like to have a large R&D staff? Would I like to have more engineers? Yes, of course.

But I think we're really well positioned to do what we need to currently..

Our next question comes from the line of Steve Lichtman of Oppenheimer. Your line is open..

This is Dennis [ph] in for Steve. Thanks for taking the question. You talked about in recent calls altering messaging with physicians, not these restrictive in targeting new patients. Just wondering what kind of progress you're seeing with the new messaging..

I'm sorry. You're breaking up a little bit.

Can you repeat the question?.

Yes, absolutely.

Is it any better?.

So, the question is targeting new lease in subsets?.

Actually the messaging, you talked about kind of changing messaging for the sales force you use when approaching physicians, not be as restrictive in targeting new patients and just how progress has been with that effort?.

Yes, okay. I understand the question now. And progress has been really good. So originally the message was let's go with the lesions that are perhaps the simplest that you would do with the competing technologies. Avoid any calcification for the most part. And they're the more shorter, the more discreet lesions.

And the message now is that the lesion length is no longer an issue. Gross calcification perhaps is a limitation, but we still do much, much more calcium currently. And we no longer have to say the short, really discreet and focal lesions is originally - I mean, I'm just repeating myself.

But it's interesting that we messaged that through the sales force. But the real message about all that of course comes from peer-to-peer training. So, doctors who're showing each other, the cases that they've done - and when we get together with the physicians - I know Ernie Suede did this below-the-knee case in Germany.

The next day they did one in the U.S. because they had seen that case over the internet. So, maybe to address this, as much as we'd like to think and I would credit the sales force, they're doing an amazing job and I'll tell you, JD is doing a good job of leading the sales force.

A lot of the information that drives new utilization and new anatomy comes also from the information that comes from peer to peer experiences and that's what I think we've got to work hard to share more of that information as well..

At TCT, we had several presentation and posters. All of those were driven by physicians. Those were not any Avinger sponsored studies. This was data that they developed in their own labs and wanted to share with their peers because of the excitement about some of the results that they're getting with our lumivascular technology.

A couple of posters were quite interesting as well because they were focused on the reduction and radiation provided by lumivascular, since as you know, optical coherent tomography generates no ionizing radiation as well as the reduction in exposure to contrast media for patients which is critically important in this patient population, many of which have impaired renal function.

So, we continue to see data being developed, the word getting out but not necessarily, as Dr. Simpson said, just from us. It's building in the physician community..

I would also say that there's a certain confidence that maybe in -- just can't do in some of the earlier questions that we answered, but I just have to talk a little bit about Ernie Suede case where using fluoroscopy and using the angiography, it confirmed that a below-the-knee vessel was badly diseased on the left side of the artery, if you will.

And he put the Pantheris down in the -- and aimed it toward the left side of the artery and it was totally normal. So, everything that showed up on the angiography and the fluoroscopy totally led the physician and would have the led the physician in the wrong direction.

That's how I know with confidence that imaging now has driven dramatically the safety profile because then that -- Ernie turned the device, aimed it in the other direction, that's where all the disease was, took it out and the vessel looked like it was normal.

So, all of our historic tools that physicians and I'm guilty of that press more than anyone else.

I've used fluoroscopy and have absolute confidence that it tells me where to aim and frequently it is really, really, really wrong and that drives an understanding of the lesion subset selection that drives the physician to treat the lesions differently than any remessaging of the sales force.

Does that make any sense? I probably did not make much sense but hopefully you get the gist..

Yes, no that was great, just one follow up after Tom.

Just coming out of TCT, your kind of latest thoughts on concomitant use and drug-coated balloon atherectomy?.

Yes, I have a huge prejudice and a bias and so I know that for sure it's going to happen, it's already happening, you see a lot of it.

I think that many times we do not need the drug [indiscernible] balloon, but it is going to be part of their reality and we'll have to see over time if that's really -- if anything, I think more people will get -- I think everybody's going to get atherectomy because you have to prep the vessel first.

I don't think anyone believes that the drug-coated balloons by themselves are an effective way to treat peripheral artery disease. So, atherectomy and it has to be done, in my mind, first. After that, I think probably more drug-coated balloons are going to be used and needed but it's certainly at the discretion of the physician.

I do believe that there is a growing enthusiasm for drug and in spite of my reluctance, I suppose of growing enthusiasm for drug related balloons post atherectomy and you see a lot of that work being sponsored by some of the other companies that are involved in atherectomy and have drug related balloons..

No and kind of building on that, there seems to be and really we saw this from NCVH last year and building, continuing to be present and building in the cath lab environment, is there's a lot of interest in this combination of atherectomy and a drug-coated balloon and especially the significant debulking provided by directional atherectomy prior to application of a drug-coated balloon.

And we think that that will continue to be supported by marketing from other companies as well as by some of the studies that are out. But I think we directly benefit from that.

Since we do provide that debulking, we provide the real time visualization and really our message is about empowering the physician to decide what they believe is best for their patient and to provide that real time imaging as a real time tool for them to do so..

Our next question comes from the line of Neil Chatterji of Cowen and Company. Your line is open..

I'm just calling in for Josh. Just going back to, I guess the commentary on the sales force. You know that you mentioned some of the changes and the geographic changes there.

In terms of the actual productivity, I know some of the reps kind of came in latter part of 2015 and early 2016, can you just talk about maybe just specific either initiatives or things you're doing to help them kind of accelerate that productivity ramp?.

Yes, I think that there is a real focus on continued training and continuing to bring up the clinical capabilities of our sales force. There's a focus as well on training and retraining and refining our sales process and how we approach new accounts, how we launch accounts.

So, really JD and his sales leaders bringing a lot of discipline to the process. Also, I do believe that we're benefitting just by folks being involved with lumivascular longer.

You know even those who have been involved with treating PAD which is most of our group or even atherectomy in the past, the combination of real time imaging and atherectomy is new for everyone and so the longer they're on board, the more efficient they get.

I do believe that there is some good strategic moves happening as it relates to focusing on high opportunity markets and kind of building out from a position of strength.

Using I think more effectively, clinical specialists in combination with territory sales managers to extend case coverage in a given market and enable the territory sales managers to spend more time prospecting or developing new accounts.

So, nothing exotic here but just, I think, very good discipline sales process and a lot of emphasis and focus on training and accountability..

And it's going back to the enhanced cutting ability that you spoke about. What was kind of the feedback in the marketing testing? I think you mentioned 10 liver vascular accounts.

You know what kind of feedback did you get and what kind of impact do you expect for that to have on the utilization?.

Yes, I mean I think we've disclosed that it's the increased efficiency that the cutter has to do with some changes in the cutter edge and it can be characterized in a lot of different ways. Some people characterize it as more of a scallop cutter but it is more efficient.

The physicians uniform, they have said that it cuts more, engages the tissue more effectively. It cuts with less pressure, less force required to devest the device through the lesions. Across the board, is it still aggressive enough to cut -- it cuts moderate calcium in many settings.

Does it deal with real aggressive calcification, seems to be pretty effective in that study, but we do not have a wide experience in that setting either but we know how to -- we know what the advantages are of building this device and how we need to -- maybe even need to make some of the -- now that the cutter is so good, we need to make some of the drive systems and the torque shaft and maybe those need to be a little bit more robust but I think the feedback of the new device has been profoundly favorable.

And maybe has been one complaint is why the cutter is so good now, the device -- we're able to challenge the device and now then sort of the drive system needs to be more aggressive..

And that is, as we talk about the next version of Pantheris which we intend to file a 510(k) for in the first quarter of 2017. That is the device Dr. Simpson's talking about and that will have only this new, as John said, scalloped cutter, will be in that -- both sizes of that device. So, the increased pushability, new drive coil, et cetera.

That will all incorporate the new scallop cutter. But the scallop cutter, within our current Pantheris configuration is now available everywhere. Based on the positive experience in the third quarter in our market preference test, we have launched that.

We still have our original cutter out as well but the scallop cutter is now fully available to the market..

And then just one other follow up before I jump back into queue. Just in terms of the V.A. and the health trust, I guess partnerships or agreements, I think you mentioned maybe getting one additional Lightbox for each of those or through each of those agreements.

Can you just talk about what, you know what are those agreements -- really open up? I mean are they hunting licenses in the preferred vendor in those opportunities and what kind of expectations do you have for those going forward?.

Yes, so both agreements, you know one is obviously, we have a government contract so that we now have access to the V.A. which is the largest integrated healthcare in the country with 1,700 hospitals, clinics, et cetera. The pricing and terms and conditions are prenegotiated both for the catheters and also for the Lightboxes.

So, it makes it very efficient once a physician desires the product and the funding is approved. But to use your word, it is a hunting license to go in and sell the benefits of lumivascular technology, get physician adoption and then bring this really important new technology to our veterans and through this healthcare system.

It certainly streamlines the process and it makes it easier but you still have to sell the account. Health Trust, as you probably know, if one of the largest and most compliant GPOs with I think over 1,400 members. And unlike a lot of other GPOs, Health Trust actually owns many of their hospitals so one of the reason they're so compliant.

We went through a process with them, presenting to their interventional radiology committee, their cardiovascular committee and really getting buy-in from not only their clinical kind of advocates but also their corporate gatekeepers and partners to vet this technology and for them to decide they wanted to make it available to their customers.

Same type of process where we now have contracted pricing, deal structures and catheter pricing which we can leverage.

We also have access to information as to atherectomy procedures performed our PAD procedures in the different hospitals or regions where we can identify targets for each of our territory sales managers and our lumivascular sales managers for accounts that they should be going after and we can hold them accountable to reaching out to.

So, again, getting the agreements in place is a long process which we celebrate. You know it took over a year in each case but it's now how we leverage them, what we do with them and can we work in partnership with Health Trust and the V.A. to bring this life and limb saving technology to their -- the patient population served by their institution..

Thank you and that concludes our question and answer session. I will now turn the call back to Jeff Soinski for closing remarks..

Thank you all for joining our call this afternoon. As always, we very much appreciate your interest in our Company, your questions today and look forward to updating you on our progress when we report our fourth quarter results. Thank you..

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day..