Thermogenesis Holdings Inc (THMO) 2010 Q3 法說會逐字稿

Hello. This is the Chorus Call operator. Welcome to the ThermoGenesis fiscal-year 2010 third-quarter results conference call. (Operator Instructions). For your information, this conference is being recorded. I would now like to turn the conference over to Matt Plavan, Chief Operating and Financial Officer. Please proceed, Mr. Plavan.

Thank you and good afternoon, everyone. With me today is Mel Engle, Chief Executive Officer of ThermoGenesis.

During the call today, Mel will discuss our key accomplishments and revenue performance, and I will follow with a discussion of our financial results and major operational initiatives.

Before turning the call over to Mel, let me remind you that the statements made during this conference call that are not historical facts and are forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in those statements, including but not limited to certain delays beyond the Company's control with respect to the market acceptance of new technologies and products, delays in testing in evaluation of products, initiation and successful completion of clinical trials for new claims on existing products, capital resources required to fully execute business plans, and other risks detailed from time to time in the Company's filings with the SEC.

Now I would like to call over to Mel to start us off.

Thank you, Matt, and good afternoon, everyone.

One of the hallmarks of a good company is the direct approach its CEO takes with his or her shareholders, so I will not mince words. As you can see from our earnings press release, sales were lower than expected and we did not achieve breakeven as we previously anticipated.

To begin with, I must say I am disappointed with these results. Keep in mind, ThermoGenesis is a small turnaround company making improvements every day with its products, suppliers, sales efforts, and personnel. We have come a long way.

However, as with other small companies, the road still has some bumps from time to time. Well, we had a few bumps in the third quarter, including nearly $2 million in unforeseen late-in-the-quarter sales order delays that I will elaborate upon later in my remarks. We do not believe these bumps reflect any underlying long-term issues with our business, however. Our senior management team and I have carefully reviewed our third-quarter results and have a battle plan in place to ensure we achieve our fourth-quarter sales objectives.

While we are not dismissing the importance of achieving revenue growth and profitability in the near term, accomplishments such as a new distribution agreements are critical to the long-term growth of the Company. I want to assure you your Company is accomplishing its key milestones by doing the right things. It's much improved from a year ago, and we still expect to achieve breakeven, albeit a quarter later than planned. And I will elaborate upon this later.

The changes we have made and are making will ensure the long-term health of the Company as they are going forward. On the call today, I will report the state of the Company, including some positive news on the distribution and supplier improvement fronts, and other business issues.

Before I address our financial performance for the quarter, I want to speak to the significant progress we have made with our strategy to expand distributor relationships and increase the presence of our product portfolio in key growth markets inside and outside of the United States. Including today, and over the past 90 days or so, we have announced five significant distribution agreements covering both our bone marrow and cord blood product lines.

These agreements are not only important with respect to their potential for generating revenues, but they also enable us to expand into new geographies and new indications. They provide validation for our offerings and are representative of the momentum that ThermoGenesis is building.

We are in discussions with several other potential partners that will further expand our footprint in new markets. Our most significant partnerships are with two strong companies, GE Healthcare and Fenwal. Each is a leader in the markets they serve, having impressive marketing and distribution capabilities.

Today, we announced the completion of a non-exclusive worldwide agreement with GE Healthcare covering our Res-Q system. This agreement excludes orthopedic indications in the United States, which will continue to be addressed through our contract with Celling Technologies.

This new agreement with GE Healthcare is important for a couple of reasons. First, we expect GE Healthcare will leverage its strong presence in markets such as cardiology to expand the use of Res-Q beyond orthopedics and into other indications where the use of stem cells is growing. As we have discussed in the past, this type of line extension strategy is an integral element of our growth program.

Second, it strengthens our overall relationship with GE Healthcare and builds upon the enhanced distribution agreement we have with our AXP product line with them.

Third, GE Healthcare has performed well for us in recent months. For example, GE's sellthrough to end customers of AXP bag sets during the third quarter was 42% greater than the same period in the prior year. Our two organizations are communicating and coordinating quality and customer service issues effectively and our customers are acknowledging these improvements.

We are also seeing an expansion of our customer base, as during the quarter GE Healthcare added two new cord blood banks, one in Hong Kong, known as Asia-Pacific Stem Cell Sciences Ltd., and the other in Portugal, named [Labatoria Guivado].

In mid-March, we announced the completion of an agreement with Fenwal, Inc., for the distribution of the AXP and BioArchive systems in China, India, and Japan, that takes effect June 1. Fenwal is a global medical technology company and a leading provider of manual and automated products for blood collection, and separation and storage that serves blood and plasma centers and hospitals on six continents. Fenwal has a strong footprint in the Asian market.

In August 2009, Fenwal and Golden Meditech agreed to form a joint venture in China to focus on blood collection and transfusion products. The deal is anticipated to be completed this year, subject to the signing of a definitive agreement and other customary company and regulatory conditions.

Golden Meditech owns and operates a range of healthcare businesses in Asia. It has a majority stake in China Cord Blood Corporation, the largest cord blood bank operator in China, and is the single largest shareholder of CordLife Ltd., the largest cord blood bank operator in Southeast Asia. As we have indicated in the past, we believe Asia is a very exciting cord blood market opportunity and we are delighted to be gaining traction there.

We are very enthusiastic about partnering with Fenwal, not only given their significant presence in the blood products market, but also their knowledge of Asia.

Introductory product training has already taken place to familiarize Fenwal in-country sales and application support personnel with the principles of operation and competitive images of both the AXP and BioArchive technologies at ThermoGenesis. More extensive hands-on training in each geographic region, led by ThermoGenesis employees, is scheduled for the June timeframe. Fenwal field-based repair service personnel will receive extensive instruction at ThermoGenesis's corporate headquarters located here in Rancho Cordova in the same timeframe.

In addition to these agreements with GE Healthcare and Fenwal, about two weeks ago we announced two other distribution agreements that will further exteand our global reach for our Res-Q and MXP systems into Asia and Central and South America. The first was a three-year agreement for Res-Q and MXP covering India, Malaysia, and Thailand with TotipotentSC, a distribution company with major operations in India. Totipotent sells products and services specifically targeted to the regenerative medicine market, and was the first stem-cell device and consulting company to establish a presence in India, where they now operate two facilities.

The other agreement was an amendment of an existing exclusive distribution contract with CEI that has been expanded to include the distribution rights for the Res-Q and MXP systems in Mexico, Central and South American countries, including Brazil, Chile, Colombia, Costa Rica, Panama, Peru, Uruguay, and Venezuela. CEI has been a longtime distributor of our cord blood products and has been serving the Latin American medical market for nearly three decades.

Let me now address the financial performance for the quarter and our view for the balance of fiscal 2010 and first-quarter 2011. Sales for the third fiscal quarter totaled $4.8 million, and I mentioned this before. This was lower than our breakeven revenue level plan that we had -- our breakeven revenue plan going forward.

The impact of the third quarter has resulted in a shift in our plan to reach profitability by one quarter. We are now expecting breakeven in the fourth quarter, and due to management actions we believe we will be profitable in the first fiscal quarter of 2011. We expect to be well positioned to create revenue growth in 2011, driven in part by the momentum created with our cord blood and bone marrow offerings, both in current and prospective markets, as we move into the coming year.

There were several factors contributing to our lower revenues in the third quarter, although none of them reflect any underlying long-term issues with our business. First, late in the quarter we experienced lower-than-anticipated orders from our MXP Res-Q distributor, Celling Technologies, reflecting approximately $600,000 in lower revenue. Their expected orders did not materialize due to hospital P&T committee approvals coming slower than anticipated because of concerns over rising healthcare costs and lower insurance reimbursement. Hospitals are becoming more cautious in approving new products onto their formularies.

Our internal forecasts for the fourth quarter have been adjusted to reflect these trends with Celling.

Second, during the third quarter we were pleased to qualify ATEK Medical, a leading medical device manufacturer with locations in the U.S. and Costa Rica, as our second-source supplier of AXP bag sets. This is a major accomplishment. In the Company's history, we have only had two bag-set suppliers working with us during a period of only 90 days in the history of the Company. So this is quite a milestone for us.

However, it took them a bit longer than expected to ramp to the required production levels, and as a result their quarter-end shipments to GE Healthcare were short approximately $500,000 from plan. However, I am happy to report that ATEK is now fully operational and successfully producing product in conjunction with our other AXP bag manufacturer, Advanced Scientific Inc., ASI.

Combined AXP bag-set production this quarter is expected to be materially higher than what it has been historically, enabling us to fulfill our large AXP backlog.

A third factor was our projected BioArchive sales. We sold three BioArchives during the quarter versus the six we had anticipated. Three U.S. orders were postponed at the very end of the quarter as a result of internal funding delays at two of our existing blood bank customers, equating to an approximate shortfall of $700,000 in revenue.

In total, these various factors, all of which occurred in the last two weeks of the quarter, had nearly a $2 million effect on revenues during the quarter, which is the difference between actual results and what was needed in order to achieve breakeven. With our significantly expanded AXP disposable production capacity, the opening of multiple new Res-Q and MXP distribution channels across geographies, and strong product backlog and visibility of incoming orders, we have a good reason to believe our revenues for the fourth quarter will exceed $7 million.

With respect to our program with Celling Technologies, the MXP is now in about 15 centers and Res-Q is in about 20 centers. Our near-term goals with them include, first, increasing utilization among existing customers, and second, rolling out the offerings throughout the Southwest and then into the East Coast and West Coast regions of the United States.

Celling has received IRB approval to begin its first clinical evaluation of the Res-Q and MXP systems. The single-center study will enroll 30 patients and will evaluate dosing ranges to determine the effective range of cell loading for spinal fusion procedures.

We expect several other evaluations to begin enrollment later in the year. These evaluations are important because we expect they will show with compelling data the comparative effectiveness of using Res-Q-derived stem cells for bone growth versus the current standard of care, which is BMP.

Shifting gears now, we have seen a highly positive initial outcome from our critical limb ischemia, or CLI, trial in Italy, which is being conducted at the University of Naples. The clinicians are using our MXP to process bone marrow aspirate to prepare stem cell concentrates, which are then injected into ischemic tissue with the goal of restoring blood circulation.

The good news is that six-month follow-up for the first six patients enrolled has shown increased profusion in the treated limbs, which is an important measure of blood circulation. We are hopeful that the six-month follow-up on the remaining patient cohort will demonstrate similar results. The next step in this program is to get this data into the market through presentations and publications, and we expect that an abstract of the preliminary results will be presented at the European meeting of the International Society for Cellular Therapy in September.

In early February, we announced an important milestone in our line extension strategy with the filing of a 510(k) with the FDA, seeking market clearance for the use of our Res-Q technology in the preparation of platelet-rich plasma, or PRP, from peripheral blood. PRP is used for its rich content of growth factors to enhance wound healing. In this clinical application, a small amount of the patient's blood is collected and processed to prepare a platelet concentrate, which is then re-injected into the wound area to promote healing.

The FDA has responded with an initial set of questions, nothing that we view as out of the ordinary, and we are in the process of preparing our responses and we are in discussions with them about the next steps for this submission.

We have demonstrated good outcomes in our Company laboratories using the Res-Q technology for preparation of PRP. In tandem with the regulatory process, we have been working with key thought leaders and have conducted initial market research on the opportunity. The PRP market is currently estimated at $150 million annually on the worldwide basis.

PRP has received significant attention of late as it has been used by a number of high-profile athletes to aid in the recovery of various orthopedic injuries.

We will be exhibiting our devices at the upcoming International Society for Cellular Therapy meeting in Philadelphia later this month. In addition, there will be posters discussing outcomes with our Res-Q and BioArchive products.

Last week, Dr. Vijay Kumar, our Principal Scientist at ThermoGenesis, presented a paper outlining outcomes from the use of Res-Q at the American Society of Extra-Corporeal Technology meeting. As we indicated in our last call, we are looking to generate data presentations and publications as part of our strategy to drive adoption of our offerings.

Let me now address the NASDAQ listing issue. We continue to monitor our listing requirements with NASDAQ relative to our stock price. As of March, we confirmed we meet the requirements for an additional grace period during which to achieve the minimum bid price of $1 a share for our common stock. The grace period now extends through mid-September.

Our approach to get the stock over $1 is to rely primarily on the achievement of our operational and financial milestones. However, we will continue to monitor the market's response to our efforts and take necessary and/or required steps within our control to maintain our listing.

Turning now to the divestiture of CryoSeal, we are in the final stages of discussions and negotiations regarding what we expect could be a multi-step transaction leading to the eventual sale of the product. We believe we have come to an understanding regarding the key terms and conditions of a transaction that would include an upfront cash payment to us. Although we can make assurances, our best estimate is, however, we will consummate a transaction no later than June 30. While we thought this deal would be completed in the third quarter, negotiations have taken a bit longer.

Before turning the call over to Matt to cover finance and operations, I'd also like to highlight our other announcement today, and that is the appointment of David Carter to the Board of Directors of ThermoGenesis. David has many years of healthcare industry experience, including large organizations such as the American Hospital Supply and Esmark. Equally important, he has served as Chief Executive Officer of two fast-growing publicly-traded companies, Xenogen and Somatix Therapy, and has extensive experience with cell therapy, medical device, and blood product companies. I offer a warm welcome to David as he joins our Board.

Go ahead, Matt.

Thank you, Mel. I'll begin with a review of our financial results and then provide an update on our key operational initiatives.

Just as a frame of reference, Mel's remarks in regards to revenues reflected variances from our expected revenues needed to break even, which was just over $7 million. From this point forward on the call, I will be comparing our third-quarter results to the prior-year third quarter, similar to the MD&A comparisons provided in our quarterly SEC filings.

Revenues for the third quarter were $4.8 million, compared to $5.1 million in the same period in the prior year, a decrease of $384,000, or 7%. The decrease in revenues is primarily due to $476,000 of lower BioArchive device sales during the quarter.

Additionally, ThermoLine freezer revenues were lower by $290,000 due to a lack of freezer sales. Offsetting these decreases were increases in the AXP device revenues of $192,000.

With our second AXP bag-set supplier, ATEK, up and producing now, we anticipate significantly higher AXP disposable revenues during the fourth quarter as we make progress towards filling our AXP backlog. As Mel mentioned, at the end of the quarter AXP disposable backorders were $600,000.

Turning to gross margins, total gross margins for the quarter were 29%, versus 35% in the same quarter a year ago and 34% in the prior quarter. Our margins in the third quarter of fiscal 2010 were lower than the prior-year quarter, due primarily to two specific factors, an increase in our product warranty reserves as part of our periodic warranty assessment process and engineering rework and material costs as we have transitioned to a contract manufacturer for our ThermoLine product. With this valuation complete, we do not expect to incur redesign or upgrade costs with this product time at this magnitude going forward.

We continue to manage operating expenses as they were $2.8 million in the quarter versus $2.9 million a year ago. Our operating expenses were lower than the quarterly range of $3 million to $3.5 million that we had discussed in our last call. We have accomplished this through lower SG&A expenses, including lower marketing literature costs and professional fees, while experiencing a small decrease -- I'm sorry, a small increase in research and development expenditures. We continue to make prudent investments in extending our products for new indications and in new product development.

Year to date, we have achieved a reduction of nearly $1 million in operating expenses as they were just over $10 million in the first nine months of fiscal 2010, versus $11 million in the same period a year ago.

Our net loss for the third quarter of fiscal 2010 was $1.4 million, or $0.02 per share, versus a net loss of $1.1 million, or $0.02 per share, in the same period a year ago. Year to date, we have reduced our net loss by nearly $0.5 million, $5 million in the first nine months of fiscal 2010 versus $5.5 million in the first nine months of fiscal 2009.

We ended the quarter with $10.1 million in cash and short-term investments. This compares with $11.2 million at the end of the prior quarter and $13.1 million at the end of the first quarter.

So, despite lower-than-anticipated revenues in the quarter, we continue to conserve cash as our cash burn during the quarter was $1.1 million versus $1.9 million in the prior quarter and $2.5 million in the first quarter of fiscal 2010.

In connection with the recently outsourced ThermoLine product line and the divestiture of the CryoSeal product, we expect to benefit from a streamlined supply chain and production activities and lower production costs, which will allow us to achieve increased gross margins over time. In addition, we expect further optimization of operating expenses to a level where they should average between $2.5 million and $2.8 million per quarter by the time we enter fiscal 2011. This reflects our strategy to realign our expenses towards higher-value opportunities.

I'd like to now turn the call back over to Mel for his closing comments. Mel?

Thanks, Matt. We'll get your questions in just a moment, but I wanted to reiterate where I see ThermoGenesis today and where the Company is headed.

I greatly value management's credibility and want to assure you that we are not pleased with our financial performance for the quarter. At the same time, I want to emphasize that ThermoGenesis is a much stronger company than it was a year ago.

Our expenses are under control. We have continued to address product quality and yield issues, and we have enhanced both the management team and our Board of Directors.

Equally important, we now have a number of leading organizations marketing and distributing our products and we believe these relationships will lead to sustainable revenue growth as we expand into new geographies and into new indications.

We have the technology, leadership, and strategies in place to achieve our goals. We know many of you have been shareholders for a long time, and we ask for your continued support as we move forward and realize the Company's exciting potential. Thank you again for joining us today, and we'll now open the call for your questions.

(Operator Instructions). Jon Hickman, MDB Capital Group.

I want to get some more clarity on this revenue miss. I understand the AXP bag set part and how -- now that you have another manufacturef, that should take care of itself. But I don't quite -- the BioArchive, the three that you didn't sell, what's -- how come -- what's to prevent that from kind of a continuing rollover? Do you have a better outlook on that side of the business that says you're going to be able to sell those extra three and then keep going from there?

And then, the deal with SpineSmith or Celling technologies, have they gotten the approvals they need from the hospitals now? You're a month and a half into the next quarter.

This is Matt. I will take the BioArchive question, then I think Mel will probably want to address the Celling question.

The BioArchive, if you look back historically, we tend to sell 20 to 22 of those a year. We have continued to put a lot of effort into attempting to sell more and forecasting better than that. And what we have found is, as we've talked about previously, there probably isn't in the near term significant opportunity for outside revenue on the BioArchives.

So what we are doing is is, on average, we will do between four to six a quarter, typically. I know this quarter it was three, and lower than that average. But looking into 2011, we are taking a little bit different approach with BioArchive and we are kind of backing off on our expectations until we have an opportunity to do some things to the design that we think will help us to expand into new markets.

So I guess the answer is that we are comfortable forecasting four to six a quarter now, and with Fenwal coming on board here, we think that we may actually be able to do better than that. But as we plan for the future in the next several quarters, we expect -- we are heavily reliant on the AXP and the Res-Q product to drive our revenue growth in the near term, not the BioArchive.

I will address the SpineSmith selling. We have had conversations with them as of mid-March, just at the end of the quarter. And their business is -- they have found that their momentum was lower than they expected as well because of these P&T committees, and so forth, that the approval process has been slower.

But I think that our most recent correspondence with them is telling us that the market is starting to change for them and that their business is starting to come back. So that is good for us. And we have to realize that they are a small company. I think we sold $1.2 million or something like that since we've been in business with them. That is a decent book of business. And they are really our leaders in the market with our Res-Q and MXP products, and so that has helped us in our overall ability to get new distributors for those products as well.

I know that GE and others have relied upon the success that SpineSmith has shown with the product to -- for them to sign up as well for the technology. So we will be watching them on a regular basis. It's kind of hard to see them on a daily basis since they're a distributor and we don't see them every day. But the reports we get are positive as they are coming back.

So are they -- before they signed on with you, they were using some other technology to get bone marrow stem cells. Are they still using -- have they converted over completely to your technologyg or are they still using the old stuff too?

My understanding is that they've converted from the harvest system to us.

Okay. Then, GE is now your distributor for Res-Q, except for in orthopedic therapies, right?

They are a non-exclusive distributor, which means that we could very well have other non-exclusive distributors in the same marketplaces that GE is in.

Is this the same group that is doing the AXP?

Yes. So their primary interest to begin with is in the area of cardiology. We are going to be continuing to shop Res-Q to be used by other companies in other markets.

But we don't want to narrow it down onto an exclusive basis. For example, we have an exclusive situation with SpineSmith. We don't necessarily want to have an exclusive situation with GE for cardiovascular because there may be some other companies that may want to be in the same place.

So we want to make this an opportunity for our tool, if you will, our pick, our shovel, whatever, our device to be in multiple hospitals across the world being able to be used for different indications.

The analogy that we use internally is if you are a syringe manufacturing company, you really don't care what kind of drugs are inside of you. You want to make sure that that syringe is in everyone's hands. So that is how we view the product, and we want to proliferate the use of the product for as many indications as possible in as many geographies and footprints as we can.

So the agreement with Celling Technologies, how long is that exclusive for? And do they have minimums they have to meet?

I think it's probably just under two years remaining in the exclusive period that they have. And there are some minimums they have to meet in order to -- it's really an opportunity for them to extend that exclusive period, if they meet certain minimums.

They are exclusive in the United States and non-exclusive outside the United States, for orthopedic indications.

Okay. And then, can you give us any indication of when Fenwal gets going in the June, summer, fall time period, what you expect out of that?

Fenwal is a very good company, and they want to make sure that they have their people properly trained and educated on our technology. And they are not supposed to kick in contractually until June 1. So that is around the corner.

But what they are going to want to do is they're going to want to come in here and get trained on our technology and be able to go out there and sell the product the best possible way. So we're going to be spending time training them, going out to the market, helping them, getting them started, so we don't expect to see an instantaneous, huge influx of sales as a result. But I think because of their clout in that area, we will see good, long-term, solid business, which is really what we are looking for from a company like theirs.

So would you expect contribution in your -- like, in -- it would be, like, in the December quarter?

I think we would be talking about the calendar 2011 year, right, Matt? Probably something like that.

So we should not see any sizable revenue numbers between and December. It might be that they may order some inventory to train people on or that kind of thing, but we shouldn't see that as immediate hit.

The thing I wanted to point out is that, in my remarks, is that the Chine opportunity is enormous, and they are glued into -- with Golden Meditech, and I think this is really an exciting opportunity. There are hundreds of thousands of cords harvested every year there in China. And so, I am very happy to see them be excited about this product opportunity.

Okay. And I just have one more clarification on the Celling. So prior to your -- to the use of the ThermoGenesis system, they were already doing -- they were using a harvesting system. They were already in hospitals doing procedures. So when -- do they have to go back to the hospital to get approval to use your product, even though they were using a similar system before? Is that kind of the hold-up here, or are they going into new hospitals?

The answer is no. They don't need any additional approvals. Their book of business that they had with harvest is -- was one thing. Now they want to grow from there.

So what's happening is that with these new healthcare rules and regulations, and P&T committee requirements, it takes a while longer to get listed. But once you do, that gives you license to sell within that a hospital and wherever you want.

So, it's taking a while to get that started, the way I understand it from them, but that they're optimistic that the Res-Q system is very effective, and we've had excellent results across the board in their initial markets, which is in the southeast -- sorry, Southwest. And now they are expanding into Southern California and up the Eastern seaboard.

So they are very excited about the opportunity. They use the term that they are -- in the Texas hold-'em analogy, that they are all-in with us. So we're working together on this towards a very -- we hope to be a successful outcome.

Okay, that's it for me.

[Richard Cavett], [Emitech Financial Group].

Looking towards the future, do you foresee at some point the Company getting involved in the adipose cell segment? And if so, when might that be and how would you accomplish it?

We've made an announcement -- I guess, when was it, last quarter, where we actually have a material transfer agreement in place with a company called GDI out of Majorca, Spain. And we have actually moved our MXP units over there for them to begin doing non-human trials to get started with the product.

We anticipate that this could be a large opportunity for us, but we are kind of walking before we run to allow them to get familiar with the technology, to get to familiar with how it works.

It's primarily starting out in the breast reconstruction area, and they are starting with a small cadre of patients. And then, they are using our product outside of human use. And so, they are -- they've just started. So we really don't have much to say about the results so far, but from our conversations with them, which we've had within the last, I don't know, 30 days has been positive in terms of their excitement about the product and so forth.

So we are getting into the adipose market. The people who are involved with the Majorca, Spain, operation are plastic surgeons who actually discovered the fact that adipose was a source of stem cells. It wasn't known before. So we basically are with the think-tank people, which is exciting. So we are working with them as we speak.

Is that something that would require trials and FDA approval for your devices, or would that just go along with -- those type of cells are being used for that surgery to begin with?

Right. What would happen is that they would use our device to do the procedure, and so they would need to fund the trials. That is up to them. But we would provide the device for them to do their trials, and then eventually get the approvals and then use it on procedures.

So as far as our long-term discussions with them, that -- we probably would be looking at a partnership of some kind. But we would expect funding that would be coming from them to move forward. But we are very early in that conversation.

Thank you.

There are no further questions at this time. I would like to turn the conference back over to management for any closing remarks.

Thank you for being on call, and we look forward to speaking with you privately on further phone calls and in person.

I'd just like to reiterate that I'm not happy with the results of the quarter. However, we are on track for driving this Company in the right direction. One quarter does not a career make, but I think that we have learned that this is a small company and that we've got some bumps in the road that come along.

We've got some very solid new distribution agreements that are with real players, with real markets, with real dollars, and we are excited about that. We've got some very healthy purchase orders from GE for our AXP bag sets, and those are now going to be fulfilled by our two suppliers. As I mentioned before, we've really never had two XP bag set suppliers, other than one quarter, in the history of the Company.

We are entering new markets. We've got a better quality product than we ever have. We've got an excellent management team that we've brought into the Company and we've been able to retain our key people. So our operating expenses are on track, and we've got a new Board member and we are poised for big things ahead.

Nevertheless, it is a setback with the sales being the wrong way, and we are bound and determined to correct that in the next quarter. And look forward to giving you that report next time.

Thank you for participating in ThermoGenesis conference call. This concludes today's event.