Good afternoon and welcome to the Bovie Medical Corporation Fourth Quarter 2016 Earnings Conference Call. All participants will be in a listen-only mode. Hosting today's call will be Mr. Rob Gershon, Chief Executive Officer at Bovie Medical Corporation. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. Before we begin, I would like to make the following Safe Harbor statement. Today's call will relate to Bovie's fourth quarter 2016 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 material 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 Rob Gershon. Please go ahead, sir.

Okay, thank you, Mara [ph] and thank you all for participating in this afternoon’s call to review our fourth quarter and full year 2016 results and discuss our business outlook. Joining me on today's call are Jay Ewers, our Chief Financial Officer and Jack McCarthy, our Chief Commercialization Officer. At the conclusion of our prepared remarks, all three of us will be available to answer your questions. The fourth quarter was a strong finish to another record revenue year for Bovie Medical. We achieved revenue growth across each of our key product categories and expanded gross margin by 850 basis points, thanks to the increased revenue contribution from our J-Plasma and OEM businesses. The positive demand trends we saw during much of 2016 continued in the fourth quarter. Core product revenues benefited from increased sales of generators and electrodes in the fourth quarter and grew at a faster pace than the industry average for the full year, led by higher sales of generators, cauteries, electrodes and lighting. Fourth quarter comparison in our OEM business continued to reflect an unusually large order that we received during the year. And Bovie sales force produced $970,000 in J-Plasma sales in the fourth quarter, substantially ahead of their production in the third quarter, which included the one-time benefit of demo sale. As a reminder, those demo sales were primarily related to our pilot program with the Hologic. We share investor disappointment at the pilot program with not extended particularly given that all the success criteria were met or exceeded. That being said, it would not have been prudent for us to have agree to a financial arrangement that would be unfavorable to the company and not in the best interest of our shareholders. J-Plasma is an exceptional transformational product and we are currently in…

Thank you, Rob. And thank you all for joining us today. We are pleased to report on another quarter of strong financial and operational performance. 2016 was clearly a year of substantial growth and strategic progress for the company. It was a record year with the company establishing new highs for revenue, further gross margin expansion, and reduction in our cash burn. Over the course of the last year we remained focused and executed well on the business priorities that we laid out earlier in the year. Let me take a moment to discuss these achievements in greater detail. We had another quarter of strong sales and we have delivered six consecutive quarters of double-digit sales growth. Compared to the same period in 2015, total sales growth for the quarter was 14.5% bringing full year your growth to 24.1% which was above our guidance. We reported total revenues of $9.5 million in the quarter reflecting healthy demand from our existing customer base and solid performance across all three of our business categories. Let’s take a look at each of our business units in a bit more detail. Compared to the same period in 2015 sales of core products in the fourth quarter were flat at $7.5 million. OEM revenues increased to 132% to 977,000 resulting from new manufacturing and development contracts and the transition from development into initial production of certain existing contracts. On the growth side which beginning in 2017 will be referred to as advanced energy, sales increased to 179% to 970,000, J-Plasma accounted for 10.2% of total revenue in the fourth quarter more than doubled to 4.2% contribution in fourth quarter of 2015. For the full year the story is similar. Total sales increased 24.1% to $36.6 million compared to $29.5 million in 2015. Core sales are…

Thanks Jay. In terms of our business outlook there are three key takeaways. First we expect Bovie to achieve double-digit growth in 2017 driven by another year of strong growth in J-Plasma sales in gynecology, plastic surgery and surgical oncology including GYN oncology and urology. We believe that our core product revenue will continue to outpace the industry average, thanks to a focus on animal health, launching new products and increasing our production of private label products. Revenues from our OEM business are expected to return to more normalized levels of between 8% and 12% of sales from 14.5% of sales in 2016. Thus we are guiding to double-digit revenue growth for this year despite the impact of the lower OEM sales which equates to approximately a 3% decline in total revenue. There are potential upsides to our current expectations for all three business groups including any new sales channel partnerships and additional OEM orders. Second, in 2017 we will be proceeding with more clinical studies and increased marketing activities to drive broad-based awareness and adoption of J-Plasma with the funding coming from our existing operation and the proceeds from the capital raise in November. The manufacturing and R&D capacity we have in place can support a substantial increase in production without a commensurate increase in operating costs, enabling us to continue to leverage our cost structure as we scale the business. And third, we are making rapid progress on new product introductions that can significantly accelerate growth in J-Plasma sales and build our portfolio of advanced energy products. In addition to the new product launches I discussed earlier, we are in discussions with several robotic companies to jointly developed J-Plasma configuration that can be fully integrated onto their robotic platform and we are also expecting to do a limited launch of an innovative solid tumor ablation product later this year that will round out our product offering to surgical oncology specialties to include Cold plasma, thermal plasma and saline-enhanced ablation. To sum up, we continue to effectively scale the business in 2016 and we see significant opportunities ahead to capitalize on the value of our current portfolio and robust product pipeline. At this time, let's open the call for questions.

Yes of course. [Operator Instructions] And your first question comes from the line of Dave Turkaly with JMP Securities. Please proceed.

Thanks. Good afternoon. Just one, Rob, on the comment you made the direct contribution ahead of 3Q for J-Plasma. I just wondering, could you give us the details there, maybe looking backward at 3Q just how those direct contribution broke-out versus the total J-Plasma number?

Yes. So, thanks Dave. It's Rob. We didn't breakdown specifically, what the demo sales were in Q3, so we didn't report those specifically. What we did report is that the Q4, the 970,000 of Q4 sales far exceeded that of the direct sales force in Q3. Because as you know in Q3 we did receive a large demo order from Hologic, that is not of course attributed to the direct sales force.

So then I guess this is a follow-up on that. If you’re looking sort of the trend and I know maybe you don’t want to give us this specific numbers, but if its far exceeded of what would happen the third quarter, I guess you direct sales force productivity. Can you give us any color there in terms of how that either look to the year or I mean, was it the highest at the end of the year or any color you could give us to help us kind of think about how the ramp in J-Plasma is going?

Sure. Yes. So I'll start and I’ll certainly invite either Jack or Jay to add any color if I leave anything out. So what happened in 2016 in terms of the direct sales force production is what you would expect and that is it grew sequentially quarter-over-quarter throughout the years. So the momentum started and it just built throughout the year.

If no one else is going to happen on that I guess I just have one last one I could throw at you. I think we’ve talked in the past about some of the other areas that you're looking to bring to J-Plasma too and that some of them on the cardio side were actually somewhat significantly larger perhaps them than gynecology and oncologic gynecology as well. I guess, are those still on the table? Are you still to working to try to expand into the cardiovascular, cardiothoracic some of those areas that I think you have identified a sort of bigger options for J-Plasma over time? Thanks.

Okay. Thanks for the question. I'll start and then Jack will add additional color to this question. So the big growth opportunities for J-Plasma are clearly in the areas of oncology surgery which includes GYN oncology and so forth and urology, and in plastic surgery as well as the cardiac and thoracic. And what will really accelerate the adoption specifically in the cardiac and even further in the oncology surgery -- surgical oncology space is the launch of the new technology. So with that, I'll invite Jack to add additional color.

Sure. So Dave, thanks for the question. The new technology, the Cool Coag and the new handpiece that we’re launching, will enable us to drive adoption into those different specialties. The great thing about J-Plasma is that it is so precise and allows for minimal tissue damaged. The trade-off there is that in its current configuration you cannot stop large bleeding. The new product addresses that. The additive features of both monopolar and thermal plasma allow surgeons to not only use J-Plasma for delicate [ph] structures, but they can stop any bleeding as well. So that opens us up to multiple specialties. In addition, the handpiece alone and its new configuration is ergonomically superior to our current configuration. This will allow other specialties who for instance, cardiovascular, who want to use J-Plasma, but just could not because ergonomically the current configuration is just too waited, so for a long four to five hour case it was not able for them to use it. Our new product addresses that. So we have a plans in place to drive adoption in those specialties immediately.

Great. Thanks a lot.

Your next question comes from the line of Matthew O'Brien with Piper Jaffray. Please proceed.

Thanks so much for taking the questions. Just to start with, I think I’m just trying to make sure I understand that OEM commentary, Rob. Just you mentioned 8% to 10% of sales in 2017 and that potentially being – did you say a $3 million total headwind because that would mean, it would be a couple million dollars of revenue for the full year?

Right. So, just to clarify. The OEM business this year -- I'm sorry in 2016 benefited from a large order from a one time large order that occurred earlier in the year. It occurred in Q2 I believe of 2016. That was unexpected. So is upside to our forecast back in 2016. And we know that that was a one time order and it did result in unexpected extraordinary growth in the OEM category or the OEM segment. So what I was suggesting in the prepared remarks is that despite – that order was a one-time order. Even without that unusual order we are still calling which represented really 3% of our overall revenue, so it was that significant of an order that even with that we’re still going to guide to double-digit growth and see upside in all three business segment. So the reference to 3% represented that one-time order. Did that clarify it, Matt?

And your next question comes from the line of Russell Cleveland. Please proceed.

Hello. That was good numbers. I really appreciate what you did last year and the forecast for this year. My question is in dermatology plastics that seem like a very big area for us. And I know we were going to go do some trials to basically enable us to advertise in the whole plastic facelift area. Can you comment on how that's going and what our plans there in dermatology?

Yes. Okay. Thanks Russell. It’s Rob. I’m going to start and then Jack will add some color to these comments. So we are embarking on a clinical trial to increase the indications for using J-Plasma in certain plastic surgery and dermatological areas. So, we commented in the past that we’re going to embarking a clinical trial and seek a very specific 510-K indication for skin resurfacing. Right now skin resurfacing is off label and what that means while contraindicated, so surgeons can use it for that. As a company Bovie Medical cannot market using J-Plasma for skin resurfacing. Having said that, plastic surgery is a big growth area for us right now for on-label procedures and it is certainly a big part of what is fueling growth now and where we expect a lot more growth in 2017 and beyond. So what I last Jack to do is expand a little bit on our plastic surgery strategy and on some of the on label indications where we really think significant growth.

Sure, Rob. Russell, thanks again for the question. We are experiencing some really nice growth in plastic surgery and as Rob said, we’re not promoting the demo resurfacing procedure at all. But we have seen certain dailies use J-Plasma subcutaneously regulation following procedures like liposuction and things of that nature and they’re getting tremendous results there and they are saying that this technology is meeting an unmet need in the marketplace. So, they’re very excited about that and we are seeing some growth there. Additionally, they're using it for debridement of wounds and wound healing where we again we are seeing an uptick there, so it is a crossover between plastics and wound healing. So that's nice growth for us. And then of course we always stated that, the capsule scoring is a great procedure for us, scar revisions I think of that nature.

Great. Thank you so much.

Your next question comes from the line of Matthew O'Brien with Piper Jaffray. Please proceed.

Thanks. Can you just hear me okay?

Yes. We can hear now.

Okay. Sorry, I’m not sure what happened last time. But just to follow-up a little bit, Rob, as far as the headwind in terms of losing Hologic, what kind of headwind is that going to oppose for you this year on the top line?

Yes. So with Hologic, we didn't have in our forecast sales coming from Hologic. We always considered that to be upside to the forecast, and we certainly did expect to move forward with following the pilot into a permanent agreement. So it was a surprise that we didn't move forward. So we do view that as a setback to upside to our forecast. And as a mention in the prepared remarks we are having discussions with multiple potential sales channel partners. It is worth noting that back in March of 2016 when we announced that part of our strategy to scale the business is to enter into a sales channel partnership for GYN surgery that we had several interested parties and when we selected Hologic there were other parties that came back that were disappointed that they weren’t selected, and requested that they be part of contingency plan should something happen. Well, fast-forward to today, they are part of the contingency plan. Those discussions have commenced immediately following our announcement. And we are pursuing. We are still pursuing that as a strategy for the GYN space alone, just GYN.

Okay. And then just, I’m going to ask you another longer question in case that you cut off. Can you talk a little bit about your thoughts around the CONMED contribution and maybe of the pelvic lymph node opportunity a little bit longer term. I know there is still more work that needs to be done there. But just the potential for CONMED this year in the pelvic lymph node opportunity and then as far as Cool Coag, it sounds really interesting, but there is lot of application there. So with that as long as -- as well as J-Plasma just how do you go to market with all those different potential applications you know partnership, by what the percentage do you think you’re partner on versus you'll do it self-directed? Thank you.

Okay. Yes. So I’ll take it one at a time and again invite Jack to chime in with any additional color. With respect to combat, so this of course for orthopedic Ablator and as we've indicated in the past our strategy, our go-to-market strategy for that is to have a completely outsourced. So we are not going to be carrying that in our bag from a direct sales perspective. So CONMED, we entered into a worldwide marketing and sales agreement and we do expect that it’s a five-year agreement and we do expect contributions this year, certainly. So it starts at the very end of this quarter call it really beginning of Q2. So, that will fall under the category of advanced energy. So, as Jay mentioned in his prepared remarks we’re no longer calling that segment growth, we’re calling it advanced energy and right now the products that fit into advanced energy will be J-Plasma and PlazXact product and the other product that I alluded to, that will do with limited lunch later on. So we do expect that to absolutely contribute in 2017. With respect to the pelvic node opportunity, I believe you’re referring to Dr. Patel’s lymph node study that he's doing. And the timing of publishing that is a little bit uncertain because we don't have control over that, but we do know that he is nearly completed if not completed. The 100 [ph] case study and once that study is completed then those patients have to be filed for about six weeks or so. And then they'll be a right up to the study. So, all that to say that we think that study will come out certainly in 2017 the timing is a little bit uncertain to us if we’ll seek the lead of Dr. Patel on that one, we do think that that's quite significant. It certainly is a play in all oncology procedures, so we do believe that it will contribute in 2017 and beyond. Our go-to-market strategy is really want to focus there. We are very much focused on online on surgical oncology including GYN oncology and urology. So, our direct sales force is the one that will be focused on that. Don't think of sales channel partnerships for that space at least we don't, we don't think of sales channel partners for that. The Cool Coag application, I’ll turn over to Jack to really comment on the Cool Coag and kind of our go-to-market.

Sure. Thanks, Rob. Cool Coag, as we said before is the J-Plasma product, so we don't want to add any confusion. Cool Coag as is part what we calling on our new product. But on one [Indiscernible] you’ll have J-Plasma. You'll have monopolar. And you'll have this helium-assisted monopolar which we’re calling Cool Coag which is a thermal type of plasma on the device. So, it is J-Plasma in an open configuration and it also be available in the robotic headpiece as well. So what we’ll do there. We are focus as Ross said several times oncology, so this will be a great fit for oncology as you’ll be able to do a lot of procedures with it. Right now, in GYN oncology ecology and surgical oncology we’re looking at some significant uptick in high-tech procedures as one example, cytoreductive surgery as another example. And then, Rob, also profiled potential limited launch at the end of the year with our Saline-enhanced ablation product which will get us into solid organ cancer cases. So, we'll have a nice portfolio for oncology cases and again the Cool Coag and J-Plasma really speaks the versatility of product as again its going to open up all of these different oncology procedures, but allows to go into cardiothoracic, cardiovascular as well, which we working, we’re working with some thought leaders to identify the right procedures. We’ve also said, we’re going to identify the right procedure where we’re going to drive a clinical outcome and an economic benefit. So that is our mission and we will work with our [Indiscernible] to make sure we deliver on that.

Your next question comes from the line of Charles Haff with Craig-Hallum. Please proceed.

Yes. This is Lucas Baranowski on for Charles Haff. Returning to the PlazXact for a moment, can you give us some color on what you expect the ramp for that product to look like? Obviously you said there will be a revenue contribution but just wondering how fast you kind of expect the revenues to ramp for it?

Yes. So we don't – Lucas, thanks for the question. We don't breakdown our revenues by product line with the exception of J-Plasma. We don't report on specific product lines. Having said that, we are expecting a contribution this year really, I like I had spoke slightly before what I said really starting in Q2, it starting now for PlazXact. It started already in Q1, and it will build throughout the year. And we expect, once it does we expect years two through five to grow considerably over time. So it will have a contribution this year and it will build from there.

Okay. That's helpful. And just a quick follow-up. Do you have -- have you done any work on the what you believe the total addressable market for that product to be?

Yes. For PlazXact.

Yes.

So, what we have, what we published on the Investor DAC, I think its on slide eight is the total addressable market, I don’t not have it in front of me. The way we describe that in the Investor DAC is by number of procedures. Since PlazXact has not – I’m sorry, since CONMED has not really announced the ASP for the product we haven't put it exact dollar amount. So we put the number of procedures.

The number of procedures in the range of the ASP in the market right now is $110 per unit to $180 per unit. So that is a range of the competitive products out there. So, again CONMED is going to control that price point, so we don't give [Indiscernible] controlling the price.

No problem. I think that answers my question.

Your next question comes from the line of Rob Romano with 1st Source Bank. Please proceed.

Thank you for taking my call. Just a follow-up on the PlazXact. Can you give a little more color on that? Is this is a product that could be 5 million in revenue 10 million or more or less?

Right. So we haven’t guided to any specific revenue amounts for this product at this time. So it's – just to give you at least of directional. It's not that a $5 million a year product in 2017, certainly over time and it's not a whole lot of time. We certainly expected to get into that range, but you can think about it over time as a product that should contribute quite significantly over a five-year period. And the reason why we're not providing very specific guidance on this is because we don't have clear visibility at this juncture. So CONMED brings a significant footprint in this space. We know that the product has in a fairly mature product category truly distinguishes itself with its low thermal temperatures and compatibility with really any electrosurgical generator so there's no capital component to the purchase of this product. You’re only purchasing a disposable handpiece. What we don't know is putting CONMED’s footprint -- sales footprint and putting it in their bag, how big this can get. So when we have clearer visibility and there are clear commitments and so forth we’ll get more precise our guidance. We just simply don't have the visibility at this juncture.

Okay. Thank you.

But it is important there, I’m sorry to interrupt that as part of the agreement that we have with CONMED there are metrics in there and there are minimum, so we have limited visibility and once this really start progressing we’ll get more precise when we know it together with CONMED.

Okay. Thank you. In regards to finding another partner with J-Plasma. You mentioned you’re talking with several different companies. Do you fully expect to have a partner in place and do you have a timeframe for that?

Yes. Good question. We do expect that we will have a sales channel partner in place for J-Plasma, for GYN based on the conversation to-date the interest level seems high and we think that we’ll likely have a sales channel partner in place. We expect the timing of it is a little difficult to say with certainty, but I think its pretty safe to say if we have one in place it will probably occur within two to four months from now probably a safe range.

Okay. All right. And with this new partner will there be a pilot program or where we think beyond our agreements as far as financials and so forth, so we don't have a whole legit hologic type problem again?

Yes. So that’s fair question. Certainly at the very onset of these discussions we've already talked through potential economic relationship and what that would look like. So we didn't even want to begin the discussion without having clarity on what that would look like, so no thinking evolves from there assuming that we enter into an agreement. Whether or not we do a pilot is hard to know at this point from a Bovie Medical perspective, we don't believe the pilot is necessary because I think we've proven through the pilot program with Hologic what the go-to-market strategy with a sales channel partner looks like. And time will tell depending upon which partnership we go with whether or not a pilot is indicated, but we don’t its necessary from a Bovie perspective.

Okay, great. You talked a little bit more robotic, looks like that could be a large opportunity for Bovie Medical, can you just provide a little more color around that and is that something near-term intermediate or longer-term?

Sure. So with respect to robotics we believe is very, very important to Bovie and to the adoption of J-Plasma. We’ve commented in the past that we are having active discussions with existing and emerging robotic companies, those discussions continue not of them have dropped out, so we continue to have dialogue with existing and emerging robotic companies. The announcement that we made with respect to this flexible version of J-Plasma, we will be launching in the second half of this year, that particular version will be compatible with any robotic platform. It would simply be utilized through the accessory port of any of the robotic platforms that exist or are emerging. So that is the short-term strategy. The longer-term strategy that we alluded to in the prepared remarks is that we are also having discussions with existing and emerging robotic companies to fully integrate J-Plasma onto their platform so that this way the product [indiscernible] down the accessory port but rather it would be fully integrated into the platform. It’s a longer term strategy then the flexible version and that continues. So it is not a coincidence that three of our five medical advisory board members represent the top robotic surgeons in their respective field of urology, cardiac surgery and thoracic surgery and it's a reflection of the importance of this strategy and how we view its growth potential.

All right. Great. What was the hand piece growth for the quarter?

The hand piece growth year-over-year was 127%.

Okay and do you expect the sequential growth in Q1 for J-Plasma?

We do expect in general. We expect sequential growth quarter-over-quarter and that includes Q1. We do expect that. And we expect that to continue. We don't expect to see any quarter that doesn't have sequential growth and we think it happened but we certainly don't expect it at any point in time. And that does include Q1.

Okay. Last question. Any comment on the actual sales of the units versus the hand piece, [indiscernible] for not selling units that eventually not selling hand pieces or made of hand pieces in a slow considerably.

Yes. So I will start certainly invite Jack to add any color that comes to mind. We it is J-Plasma is your classic razor blade razor model and that's why we report on the continued growth in the hand piece sales because that is a reflection of adoption but getting to your question specifically we continue to get additional units in use in the marketplace and that is growing quite significantly. And we have several pads for a unit to be used in the marketplace. And typically the plastic and it varies by specialty so for the plastic surgery specialty it's an outright sale almost every time. So the plastic surgery market is custom driven capital equipment and it's a very short sale cycle for us. So that happens. They also do have an option having said that in option to lease the product. So we have a leasing program and they could lease it. So for the plastic surgery market it's typically acquired out right or leased either way for both the medical or neutral on that so we see the revenue from that immediately. A program that we have in the acute care setting is we will place a generator and not charge for the capital piece of equipment but to do that we have what's call the pay-per use program and at the point of purchase or the hand piece there is an up charge for the pay-per use. And this has been an attractive option for the acute care setting because it does shorten the time horizon to drive adaption and usage of this product. So it's attractive for the surgeons because they want to use the product and it's attractive for us because we get broader based adaption and while economically it may not make the most sense for the hospital it seems to navigate their own purchasing process despite ultimately ending up paying more for the product overtime. So unit sales are growing. So the capital piece is growing hand piece is growing.

All right. Good to hear. Thank you very much.

You are welcome.

[Operator Instruction] And your next question comes from the line of [indiscernible] with Wells Fargo Advisors. Please proceed.

Hello. My name is Jim [indiscernible] and I am calling in as a shareholder. And my question is about stock dilution. If Bovie decides to raise additional operating capital in the future why would existing shareholders be better off with new stock being issued as opposed to Bovie borrowing from a bank and what guidance or assurances if any can you provide to existing shareholders that are concerned about their existing shares value being diluted in a similar fashion to those that have happened in the recent past. Thank you.

Okay Jim, thanks for your question. It's Rob. I will start and I will turn it over to Jay to further comment. We certainly are very sensitive to the issue of dilution and it is absolutely on our mind and one thing that is a little bit unusual for a company of our size is the lack of debt that we have. We are well aware of that. And we also are well aware of how sales are progressing. And what we want to be able to have the flexibility to do as sales specially in J-Plasma begin to really build on the momentum and begin to really accelerate we do want to invest in that acceleration and being in the unusual situation of having virtually no debt at all outside of our mortgage on our facility in clear water that certainly banks the question can we add more through debt instruments and that is something that is always under consideration and I will try to turn it over to Jay to kind of comment on how we think about debt financial.

Thanks Jim, yes so we regularly look at the debt market to see if that sort of financing makes sense but I will say that we don't want to put debt on the balance sheet prematurely or at expensive rates. Now we are confident as we look into 2017 and also in the 2018 we are confident in 2017 that we have sufficient cash on hand to fund our objectives in 2017. So we are very concerned about dilution we don't want to dilute the existing shareholders and we do as I said before evaluate all of our capital razor requirements as well.

Your next question comes from the line of [indiscernible]. Please proceed.

Hi guys. So couple of questions. Can you give any update on the Arteriocyte partnership and how that's progressing and as part of that any idea of when the 5 10(K) indication might be received?

Sure. Yes. So I will start. So with respect to Arteriocytesite where we continue with that sales channel partnership as you may or may not know Arteriocytehas gone through a transition of their own so they have a new ownership and they merged into another company called Isto. So that transaction occurred simultaneously as we entered into this agreement. So it didn't happen subsequently. So everyone was well aware that this would occur but consequently as a result they have been focused on their own integration efforts so this is not a big surprise to us. But it has slowed the contributions from that sales channel partnership. So now that transition is pretty much in the rear view mirror not completely in the rear view mirror but almost in the rear view mirror we expect some momentum to build throughout 2017. So that's the Arteriocyte. With respect to the 5 10(K) for skin resurfacing specifically this is going to take some time. It requires a clinical study which we are embarking on now and it requires that these patients be followed for a period of time. As a result we don't expect to have a specific indication for skin resurfacing really until 2018 we don't view it as 2017 event. So again this is off level we will not be doing anything at all to promote its use for that but as Jack profiled earlier we see very significant growth opportunities in many other areas of plastic surgery and wound care as a subset of plastic surgery for J-Plasma as it is on label, on our current indication.

And then on Hologic deal originally I think that you had not assigned a contract with minimum purchase requirements and therefore you had not put anything in your numbers. But does Arteriocyte have minimum purchase requirements or is Arteriocyte also not in your numbers yet?

Yeah. That it's a very good question. We have not disclosed the specific contractual arrangement with Arteriocyte. We have commented that in 2016, so in our past that we did not expect the contribution from Arteriocyte. We are expecting a fairly modest contribution in 2017 with upside. So, when we provide guidance where we say double-digit growth and there is upside to all three businesses, we the reason why we are providing guidance in that way is because there is several areas of upside that we see and once we gained more visibility and clarity on these different opportunities that are coming to fruition, at that point in time we are going to get a little more precise in our guidance. So, Arteriocyte we view as a modest contributor right now with the potential of being a more significant contributor as the year unfolds.

Okay. And then and so having the 5 10(K), it is certainly would enhance the capability there but is not required for Arteriocyte to get moving.

Yes. It's important to note that when we say we do not promote the off-label use of this product. Please understand that we don't promote it through our sales channel partnership either. In fact, we train our entire sales organization and our sales channel partnership entire sales organization to understand what's on-label; what's off-label; and stay very far away from what is off-label. So, we are completely distancing ourselves from that. So, as surgeons they are prerogative to use products that in any way that they see fit but we do not condone it at all. So, when we talk about the contribution, we are talking about contributions from on-label applications and they are plentiful.

Got you, okay. And then, so you talked about placing machines and then essentially billing for the capital cost within the disposable.

Yes.

And do you guys have enough of a record on that yet just to sort of go to a commercial finance guy and actually get those things financed for use, so that you are not laying out capital?

Rob, you can, yeah, you can.

It's okay. Yeah. No and we don’t. And right now it's not that portion of the business, does not materially impact the total sales. It's just another tool for the rep to sell hand pieces and get trials and things like that.

Yeah. And then another way of saying is it's not even necessary for us to do that. We don't deem that's necessary to have so and help finance that. We do have several options for our customer to get the capital piece of equipment as I mentioned before and there are several variations of each but it falls into two broad buckets, either you buy it whether it through a leasing company or through us or we place it and there is enough charge. Either way it doesn't take long for it to be profitable and accretive.

So, there's not a capital constraint issue here. And then we haven't talked about how -- Jeff, he dropped off.

We have no additional questions. Thank you.

We just lost Jeff. He was in the middle of the question.

Mara, are you still?

Yes, I am here.

Okay. So, it sounds like we lost Jeff.

Hello.

Okay. Jeff are you back?

Hello? Can you hear me?

We can.

Okay, great. So, hospitals VAC [ph] we haven't talked about in a while. I just wondering if can give any kind of update there?

Sure, sure, we are still approaching the hospital VAC in a number of trials. Right now we've got a lot of ongoing trials in VAC in process. Some of the things that that we talked about ready to help us pull product to the VAC quicker, the clinical study we referenced is one of the obstacles that we come up against, so clinical data certainly going to help us excel our adoption through the VAC. The addition of new products will also is going to engage additional specialties. So we always said that we want to increase the number of voices at the VAC for J-Plasma and these new product introductions will help do this. So between the clinical study and a new product introductions we expect to really facilitate a lot more VAC, pull-through to the VAC a lot quicker.

Yes. And what I alluded to earlier, just to kind of reiterate at this point. We have a very nice balance right now between plastics and the acute care of setting. And what we have commented on the past is the sales cycle in the world of plastic surgery is a fraction of what it is when it comes to the acute care setting. So, what we have now in our sales pipeline is just really the right balance where we are able to navigate the elongated process that the value analysis committee is a part of and still be able to grow sequentially our sales of J-Plasma through others. We’re also becoming a lot more efficient through the VAC process and a lot of that is driven by our focus in that whole surgical oncology area. It is the surgical oncology area and the subspecialties such as GYN oncology and urology that have a fair amount of influence as their revenue generators for these hospital systems, and they tend to have some influence on the value analysis committee process. So it's becoming more efficient for us as we focus on those specialties.

And then lastly on the women's health potential partners, Hologic I think had -- it was part of the discussions to be an international deal not just the US. deal. Are the other deals that you’re looking at potentially international in scope?

They are, they are. Hep.

Thank you.

You’re welcome.

And there are no additional questions in queue at this time.

Okay. So, all right, well thank you, Mara, and thank you everyone for participating in this evening's call. And we look forward to keeping you informed as we continue our progress.

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