Below is the transcript of the BSD Medical Corporation (NASDAQ:BSDM)’s Investor and Analyst Conference Call, held on January 16th, 2015 at 3:00 p.m ET.
BSD Medical Corporation (NASDAQ:BSDM) (the “Company”) develops, manufactures, markets and services medical systems that deliver precision-focused radio frequency (RF) or microwave energy into diseased sites of the body, heating them to specified temperatures as required by a variety of medical therapies.
Company Representatives:
Clint Carnell – Chief Executive Officer
William S. Barth – Chief Financial Officer
Ms. Tricia Ralph – Financial Profiles
Analysts:
Dan Yankovich – Maxim Group
Operator
Good day, and welcome to the BSD investor and analyst conference call. All participants, will be on listen only mode. If you need assistance, please signal conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question you may press star, then 1 on your cell phone. To draw your question, please press star then 2. Please note, this event is being recorded. I will now extend the conference call over to Ms. Tricia Ralph of Financial Profiles. Ms Ralph, the floor is yours Ma’am.
Ms. Tricia Ralph
Thank you! Hello everyone, and thank you for all joining us today. As you may have seen this morning, we filed our 10 Q for the first quarter yesterday, and issued our financial results press release. With us today, from management our CEO Clint Carnell and CFO William Bellfard. Now, before we start I would like to remind you that comments made during this conference call that are not based on historical facts are fore looking statements within the meaning of private securities litigation’s reform acts of 1995. These formats looking statements may include statements relating to our business objectives, plans, strategies and future financial performance among others. Many of these statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those expected results, performance or achievements expressed or implied. By statements made herein.
These risks include operational, financial and legal risks and are more fully described in the risk factor section of our annual report on form 10K for the year ended August 31, 2014 and in our quarterly reports on form 10Q. All of our plans and objectives made in this conference call presentation are based on management’s current expectation. But many such expectations are based on economic, clinical and regulatory uncertainties and must differ materially from our actual results. We assume no obligations to update any fore looking statements or information.
I’d now like to turn the call over to Clint Carnell. He’s Executive Officer of the LT medical corporation. Clint, please go ahead.
Clint Carnell – Chief Executive Officer, BSD
Thank you, Tricia and thank you everyone and welcome to BSD’s first of 2015, Annual investor webcast. My name is Clint Carnell and I’m the new President and CEO of the company & I appreciate the board for giving me this opportunity to lead, the company and for the share holders to share our plans for the future. So a little bit about myself before, we can start this on, what is really a three phase turnaround of the company. Umm.. I have formative years with Johnson & Johnson, a Gambro Healthcare Chiron, later with Bausch and Lomb on the surgical division, I just recently left Covidien before my On sight Residence Appointment, and in between I’ve done everything to start the company out of my garage, telling them to Deveta back in the early 2000s sorry mid 2000s to venture capital a company called Solta Medical, which was private to public and was recently purchased by Valeant Pharmaceuticals.
What these companies have in common is that, tip of that going into the situation where companies have had some disappointed results, perhaps they are not fairly valued and essentially that sets the company to put together a vision, a team and return the company to a situation where towards what the share holders originally thought and more in what they invested. I came to BSD medical, because I think it’s been under-appreciated and that this is a company that has a phenomenal technology, hard working committed people that we can build a team around and that, we simply need to execute better and put resources into the company to ensure the best.
The three stages, we’ll talk about today are really not designed to be a deep look at the numbers. They’re to provide the share holders a directional strategy for what I see in the early sixty days of my tenure and provide some guard rails about how I’ll approach, turning this company around. The phase consists of assessing the company and we’ve had our head buried really deep into the details of the company, working with employees, working with the leadership team, with doctors, with customers, with external advisors, with other CEOs of this space. Really, it does seem that what’s gone well in the past, what can, we build upon but more importantly what’s gone horribly and why are the results where they are right now and what can we do to quickly fix them. That’s the assessment phase and I’ll share my initial findings with you in a few minutes.
The second is to put a plan in place and that plan includes what is the vision. Who will the leadership team be & how can we start measuring these results. Many of you are investors that are familiar with what gets measured becomes important and what becomes important and measured gets done. So, I’ll be sharing some of our initial measurements at how you can look at our progress for the turnaround of business.
In the third phase really is to get going and we’re simultaneously be in these phases right now and I’ll be looking forward to sharing from the building blocks of that with you.
Turning to page 4, the sixty day assessment. The good news for share holders is I did a significant amount of diligence looking at the company from the outside and had fortunately a background in med tech as of the last twenty years. They gave me resources to look at this and find out this is something in this company before, I dive into it and get a word for the share holders. And the good news is that, we have wonderful products. Hyperthermea has done amazing things over the decade for cancer patients, for physicians for hospitals to treat this terrible disease. Microwave ablation is the best in class in the growing category. We’ll share those numbers with you in a few minutes. And at its core BSD medical has really been one of the pioneers in cancer tumor ablation.
So, we have great, great products. What we have had is a strategy that clearly requires the change in direction, when you look at the stock evaluation. And when you look at the financial performance of the company. And if I step back pragmatic about which technology, I think is better. We clearly just need to focus on just one technology. So the board, in conjunction with management has decided to focus on microwave ablation and so, exit the business of Hyperthermea. Many of you have been share holders, some for a long time and I know there’s a lot of passion. Around the capabilities clinically of Hyperthermia. I share that passion and we want to ensure that Hyperthermea, finally takes place and is able to continue on in a effective manner for patients and for doctors.
We’ll be talking about microwave ablation and our plan for that to be the public company that I hope you should choose to stay invested in. Why that’s important to focus is that these are two very different platform technologies and while they both use heat to treat tumors, they couldn’t be more different. If you look at the ability to deliver a MTX technology, it’s portable, fits in the suitcase, can be carried by the sales representative, put in the hospital, case is performed and they can be out the same day. Hyperthermea, is a product that’s wonderful but it takes 90 days to produce, it needs to literally be fork lifted into a special truck, transported, delivered to that hospital and assembled. It is a very different logistics, very different economics and a very different sales process. If you, look at the microwave ablation technology, it has very different economics and we’ll discuss this in detail versus the one and done, the capital equipment sale of Hyperthermea.
With scarce resources of a company like BSD, it’s really, really important that we take that one dollar of capital and focus it on -where we can make the most meaningful effect on top line sales. And, splitting that dollar 50-50, has led to what I’d call a diluted effort by the company to achieve the revenue target set for us. The microwave ablation product is the best product in this phase. And if you look at that market growing which I’ll share with you in a few minutes, I feel that we’re in the forefront in leading that technological revolution of microwave ablation replacing RF which is currently the standard care. That said, we will need to continue this innovation. If you’re in the med tech, med devices we do a couple of things and you have to do this very, very well. You have to continue to innovate and you have to continue to sell the market those products. And that is essentially, the two things you need to do well in that category. Failed execution will be the critical measurement by which share holders will need to judge the progress of our business. Because, there’s lessons with microwave ablation we’ve key risks with most of the product profile. That we’ve approved and have a favorable reimbursement environment. It has nice processed goods and it works clinically very well from the Safety and Healthy profile. We have all those factors in our favor; we must perform on our sales line.
Then turning to change to page 5, we’ve cleared the means there needs to be an immediate change in direction. And certainly, I think this week my eighth week on the job, my second month and we all know that there are holidays in there and I’m going out on a limb by sharing the share holders my initial assessment, my initial plans that I thought given the volatility of the stock and I think the first chronology of shareholders that wanted it, we thought it was in the best interest to communicate with you early into the year what our plans are.
As you, look at it in medical and lifetime there’s really four areas where you really have to have areas of strength. They’re pillars that are building this company. The first is an evident staged approach. When a patient has a disease complex as cancer, they need to know that the product is safe, that the product is efficacious and that at first it will do no harm and then provide the best care for that patient.
Positions in any number of specialties that which I’ve participated always look at safety, efficacy and what are the economics of the situation. So, you’ll see a plan for us to produce more clinical evidence on the microwave ablation, to position the products in that position where they’re very comfortably used in on a daily basis.
Second it’s important that key opinion leaders are seen in support of your product and Dr. Gamien De Qui of Brown University has been a wonderful supporter of the company’s products. And, we need to replicate that relationship in more key opinion leaders. So, that we can have voices shouting from the podium of the trade show on the real outcome this product can provide., the safety profile, the efficacy profile, how we can change each patient lives. In the end, doctors buy from doctors.
Third, lead in products innovation. It’s critical, that we stay ahead of the competition with new end kinda tips, and next generation generators. In a commitment that your product portfolio that ensures the hospital, that once they invest in a BSD product that we’ll continue to innovate on that platform and that it won’t be something left sitting in a corner.
And fourth, if you execute the previous three well, you need to show that customers are liking your product. And we have actually very good examples of a company of customers that have worked with injunction with a company over the years that are seeing consistent year over the year growth. The issue the company has had that we don’t have enough of those customers, so you will essentially see a plan from the company that should unleash some of the opportunities for us to grow that install base and get our products in the hands of more doctors globally through the partnerships where direct representation of our market place.
Turning to page 6, we have taken some immediate action, first and foremost we flattened the organization. We took out three significant sales leadership roles and a significant technology role. These were necessary changes for two reasons. One is to reduce the operating expense on head count and leadership roles, but more importantly is to flatten the organization and get myself and other members of the management team much closer to the customer. In a business like this it pays to be closer to the patient and understand how they feel about the outcome, so the position to understand how they use it and to the hospital system and growing up through surgical sales through various areas of medical device sales health care deliveries, its critically important you know what’s happening in the OR and the case room and you will find that I’ll be out there with our positions and with our representatives ensuring, I understand where we are in the competitive market place and how to position our product.
Second, this may be very technical and tactical, so we are changing and have changed fiscal year to go from January to December, so as we participate in this call we are in the second week of 2015 and bill will walk through with you our reported schedule but it will be in accordance with a calendar year we’ll wind up our fiscal year. The reason that is important is there is a buying cycle for hospitals and for physicians. They are more closely aligned with the January to December time frame and for the quarterly filings that we will be part of public companies to follow. That will align the organization and the urgency for top line sales in line with how our competitors sell and how our customers buy.
Third, we have made the decision to exit hypothermia in 2015. I recognize and received passionate emails from many shareholders about the value of that business both clinically as well as the potential for it financially. Both products as I mentioned microwave ablation, hypothermia do wonderful things, for patients and unfortunately, we are in a resource situation where two very different products where we made the decision to go forward with microwave ablation and Bill and I are working with various parties to divest the hypothermia business and set that business up for success. Either way, we have made the decision to exit hypothermia in 2015.
The words that I had prepared for the launch of the sales program as you get to know me you will find that we will operate with offensive urgency. The first week of January we had our global sales team in, are now working with our distribution partners and we have launched to them the new sales programs, that will give more flexibility to customers to buy the product whether they want to invest from a capital stand point have an up charge on our incentive, or to have flexibility for BSD to participate in the buying cycle with them.
We don’t share details of that for obvious competitive reasons, but it’s fair to say that given our clinical benefit, we want more physicians evaluating this governing our technology. And really creating a razor blade business. A razor blade business is better growth margins is more predictable and it is the way that the health care system particularly in the united states is purchasing equipment these days. and it was my view that the company is focused too much on capital equipment sales which lengthens the buying cycle, disrupts the physicians ability to start using the product quickly, so we hope that these will be off and running.
Our representatives and our distribution partners in the US and Europe will be closely aligned ,so that we will be working as a team to really get out in front of as many physicians as we can convert as many customers as possible. I will be actively engaged in business development effort many of you that it’s critical that we are looking for strategic opportunities that will align the growing BSD as quickly as possible. We have a very good relationship with Terumo in Europe we’ll continue to entertain, whether those are advantageous to the company. We’ll also be looking for the best way to build a stand-alone strategy that will ensure we can grow top line revenues.
Turn to page 7, I won’t leave that slide up there that long, I’m sure it hurts your eyes that’s a little bit what it looks like when you have two products without a clear strategy of how to turn the business in the right direction. I believe that when the board makes a decision to exit hyperthermia, I was in 100 percent agreement so, I get the job and I think it will give us the ability to focus our resources and unlock the opportunity around microwave ablation.
Turn to page 8, so what does focus look like? We have great product, many of the current obstacles that you have seen with technologies that have long clinical trials, you’re not sure if you can make them as a consequence that you want. Perhaps, they don’t have reimbursements. Those are taken off the table with the microwave ablation product. We will be focused, focused, focused on microwave ablation and ensuring that that becomes standard care for tumor ablation. We will be focused on new customer acquisition. It’s my point of view that our current sales force, our current business partners domestically our partnership at Terumo in Europe, are satisfactory resources to achieve the targets that I have set forth in the following pages.
If we show that this business model works well, we will invest more resources for a larger sales organization, but at this point I think it’s in our best interest to focus on product innovation peer to peer marketing method and making sure that the plans we have laid out in the first couple of months can be scaled. We will focus with our intervention radiology partners on building their tumor practices. Currently in the hospital environment there are tumor boards, these are full pattern, there are very specific decision makers, very similar to my experience in plastic surgery dermatology or in ophthalmology, where its a fragment of referral base. We have the opportunity to be partners with our positions to help them grow their practice by providing them not only clinical evidence, not only the safety profile, but also the economic benefit to the health care system and making microwave ablation earlier in the continue up care for a patient that has been diagnosed with a cancerous tumor.
And finally, we will focus on clinical and the economic benefits of our technology. As I did diligence from the outside before deciding to join BSD, I was told that we had the best microwave ablation technology, in some cases by people that maybe have our interests at heart they admitted the company should ripe themselves if they define the strategy. If they separated the products that they believe that we had a very good platform from which to build upon. When the advantages of our platform is that our cost of goods gives us a competitive advantage to price our system to be competitive, will still achieving very very nice growth margins.
Turning to page 9, why do we chose microwave? This chart on the right is outdated in 2010, we’re currently acquiring the data for 2014, but it shows a nice size market, of over five hundred million dollars in soft tissue tumor ablation. More importantly, on the left are some bullets of which if you are looking at this whether its microwave or hypothermia or any product or medical device, I think you look at this as an investment phase, this a good market to be in. Its large, the microwave ablation portion is growing at over 20 percent domestically, year over year. Radio frequency has been the standard of care and currently on 75 percent of the market, and whether its BSD’s microwave technology or other interests in the market place, we are quickly in play to replace that as a standard care so BSD’s initiative, needs to be able to grow with the market organically but deal more than our share by competing better the other players in the market place.
Nice thing about microwave ablation is that it is a recurring revenue model. What does that mean? It’s a fancy word on the famous Gillette razor, razor blade. If we need to get more razors in the hands of more people so that more razor blades are purchased as we increase in case load. The gross margin profile is superior to our Hypothermia business. Almost, twice as good, and the economics are better for the healthcare systems. So, when you look at the value proposition of delivering a product into a competitive market, is it good for the patient? Is it good for the provider and is it good for the company? And the nice thing is we have really hit the trifecta of the three things. Very good good clinical outcomes for the patient. It’s easy for the physician to deliver and is also economically feasible for the hospital. And the margin from the gross rates for BSD should take care of the rest.
Turn to page 10, Microthermic is the leading technology. Our thirty six years in providing technology to this market place has really given them some competitive advantages and I think the BSD team has done a remarkable job of choosing the safest, most efficacious versatile wavelength in marketplace. And that’s 915 mega hertz. I won’t spend too much going through the engineering aspect of this. We recently, had our sales team in for an exercise with RNDC looking at the next couple of years of our product development portfolio and this may sound a little hokey, but we gave them a hundred dollars of monopoly money and we said” if you were running product development for this company where would you spend your money?”
And there isn’t one failed representative when they spent their money at the change wavelength of our products. They believe in the marketplace that the 915 is the best one for us to choose when you look at the overall feature benefits. I believe that we need to differentiate that in the marketplace with the initials we talked about. But this is a wavelength that is very versatile. We’ve got regards to tumor size and versatile as it relates to organ. That another way, we have the ability to go from a two centimeter to a seven centimeter tumor in the lungs, kidney or liver. And our synchronous way of alignment technology allows a doctor to provide a more elegant treatment for that patient.
That doesn’t overly treat them potentially compromising safety. It is very easy to use and the ergonomic funds are very nice. Relative to our competition in many cases that larger devices require heavy shipping much like the Hypothermia business so we’re gonna look for leveraging that on the Microthermic platform. It is less time consuming than older technologies and we feel that time is money, no more so than in the hospital system. What I think escaped me when I looked at diligence is, when I was doing Diligence I wanted to see Dr. De Qui provide a treatment. The patient came in, 45 minutes later we were done with the case and the patient got up after being in mild sedation and said doctor “when are we gonna start” and I appreciate Dr. Qui’s answer in saying that we put a band-aid on him, we’re gonna put a tuna sandwich down you and if it stays down we’re gonna send you home tonight. I have the opportunity to see him talk to the patients family about that I’ve since talked to patients. We have video testimonials. With the ability for us to bring a patient in with a cancerous tumor, ablate the tumor and send him out the same day is really quite remarkable compared to older more dull days.
So, what are those three initiatives, the first one turn to page 11 is the P to P marking campaign. What does that mean? This is not just a new direction in bullet points on investor conference call. We are changing, fixing this company and putting in a very, very different position that has it has been in previously. We will be re-branding which means we’re naming the company. We’ll be re-branding the product pipeline and we will be changing the ticker symbol. This is not an expensive re-branding campaign this is a directional shift that will establish as a life time supplier, treating humanities worst disease with precision and that is cancer. And that means that we need to; quite literally, rip the band-aid off, of which has been lackluster results. And get building the company in the right direction. We do have good examples of where this has worked for us and without sharing too much competitive information we have a count that are showing significance revenue growth. Increase in patients demands, increase in physician utilization. And we went out and we looked at it the last few days about why is it successful. We asked the physicians, we asked administrators, we asked our sales people, we asked our business partners.
And we’ve taken some of those best practices and formulated new programs to replicate that. Our initiative which I’ll be sharing with you over the coming quarter is to add six of these over the year that would look more like our top performing count statistically. Much of this has been derived from the success of the Terumo we’ve had in Europe we’ve had in Europe and it’s very simple establishing standards of excellence we call these universities of ablation. I have these scientific advice report that is made up of the key opinion leaders, the thought leaders in this category to help us with a scientific, clinical and strategic direction for the company. And to provide clinical studies that we can publish, share trade shows and start to move the needle in people’s opinion of our particular microwave ablation as a benefit to offer us fidelity.
And then finally if you flip to my background I spent a lot of time not just in turn-around but also in white space. And a lot in white space where you go out and you attract the consumer’s attention so they understand the treatment options for them. I think this is a tremendous opportunity in this category when a patient is diagnosed, to go to the web. To provide the tools to social media to search engine optimization, to educating those patients to understand how to ask the doctor about the various options. And I believe looking at this that somebody has not been uncalled. See when there’s more patients, who know of the options that we provide, that it’s less invasive as it is safety profile. Limited if any hospitals say and get them back to the normal life, this is great power in helping them how to ask the doctor and have those conversations. So, pushing me in marketing campaign will be a big part of our ability to attract new referrals in those positions in office.
Turn to page 12; the medic innovation will be key over the next 24 months. We will be developing two new antenna tips. That’s important in that the hospitals investment in the physicians ability to use have more tools in the toolkit are always one of the key drivers in terms of a good relationship with the healthcare system. We should think about this in terms of putting more golf clubs in the golf bag, more tools in the toolkit. But, we’ll continue to invest in this platform to ensure we stay a part of the innovation curve. We also have done significant work on working with positions on what the next feature set should be like on our next generation generator and I will share before sharing those plans as they progress. And the deliverables of certain milestones, that we’ll share with investors in the future. Beyond just the hardware and software modifications, the clinical studies that we’re currently conducting we’ll begin conducting, we’ll expand this specific clinical indications, giving doctors more security and more certainty about how they can use our technology.
And finally….and I’m not sure looking back at the previous calls we focus on this note, our continued focus on continued focus on constant goods is a significant advantage which will leverage as we develop new antennas and new generators for the future.
Finally, our last initiative is disciplined sales execution. I’ve spent a lot of time with the leadership, members of the board, with employees. It’s my assessment that a lot of the risk is taken out of the execution for the business. I haven’t found things that the board, that my predecessor of guild shared with me during the recruiting that surprised me. I think this is a blocking and tackling solid execution plan. So execution, at the customer level between the sales person and healthcare system will be key. We are currently developing metrics, which will be sharing focused on fairly granular aspects of our business that we’ll be able to look at beyond just the top 5 revenue in these margin-ed numbers.
It is safe to say that we will de-emphasize capital equipment sales and really focus on case adoption. The value of a customer converting to our account or to our product, over a year of distributed time, relative to what it cost for us to provide that equipment has very nice gross margins in this 65 to 75 percent. We simply have not established enough customers to utilize our antenna tips to show the type of revenue that many of you would expect. Some of these programs should unlock the ability for our rest, more quickly secured new customer conversions and therefore new recurrent revenue.
Second, we are not waiting until I come up with a learning curve for these new sales programs that have been working with the sales team, with the finance team. We’ve looked at best practices in other businesses. An iteration of things that I’ve have used in previous turn-around situations more candidly, were much worse than BSDs. And we’re starting them initially. There are subjects that speak of changes and it would be foolish of me to think that in 60 days I’d have this entirely fixed out. But you have my commitment that, I’ll be quickly working with the team, monitoring how all these are working and adjusting as a court as needed to ensure that we’re successful with this.
Terumo has been a very nice partner for us in Europe, we’ll continue to expand upon that relationship in the coming weeks on the meeting with the senior management. And it’s been both our best interests to increase the rate of customer’s options in Europe. And to ensure that globally, we are espousing the benefits of our technology. And Bill and I, with the board will be engaged in high value business development opportunities. What does that mean that means that we’ll be looking at strategic options. Whether be it distribution, potential partnerships or product portfolio stand point or ways to increase the footprint for our business to increase top line sales. But that will be a focus of me looking forward as the team starts to execute on the business.
And, finally on page 14, our revenue goals. If you look at, the company’s history there has been a lot of communication around the activities of the company. There have been some significant expectations about the Hypothermea business and Microwave business. The speculation about what that revenue should do. Our goal not that dissimilar to a higher space remarkable win this last month, is to focus on getting first down. To focus on the most basic principles of running a successful business. To ensure that those building blocks equal the revenue guidance provided here. I’ve given a fairly wide range for 2015 based upon looking at our historical(s) and I believe what can be done. The math is very simple to model, if we execute success for the days from the programs we laid out last week for our sales team. Since 2015, we’ve given guidance to 3.5 million to 5 million. This is likely to tighten and Bill and I should provide better, tighter guidance as we learn more about the business and how each program is working.
And, if you look at the business of the overall global market we know that microwave, the economics of our business. If we grow at market and a little better than our share then we should be able to double those revenues once we establish the base line. We have also provided gross margins that are a little wider than what you would typically expect. And that subject it speaks on the program to ensure that we’ve been competitive relative to the landscape out there.
If you turn to 15, what are the key takeaways? I hope that many of you continue to invest in BSD and to be part of our turnaround and to share in the success of that. I hope to attract new investments. When we step back from the recent stock performance, even the revenue performance, and look at the market. It is a large market. It is growing at greater than 20 percent, undisposable. We’ve dominated by our proven technology that literally everyone knows that microwave is replacing. Most importantly, the focus needs to be very simple, the focus to provide good clinical outcome in providing our positions with in-evident based approach to the market place. To continuing to innovate on our current product pipeline as well as look for additional products, endure technologies, that will keep us in front of innovation.
Understanding how to market those and what resources reach both to customer at the patient level as well as our physician customer and turning those into sales is important. And most importantly is how to have our sales force in a disciplined manner turning prospects into customers. I believe these building blocks are very straight forward I do believe this is an executional turn around and I look forward to sharing how we will be measured and the progress we are making against those objectives, and with that I will turn it over to William S. Barth our Chief Financial Officer.
William S. Barth, Chief Financial Officer
Thank you Clint, wanna report our results for the first quarter of November 30 2014. Our revenues for that quarter were 843,000 and which is a decrease of 37 percent from total revenues of 1.3 million or the three months ended November 30 2013. Product sales were higher in the quarter a year ago due to significant stocking orders from Terumo from Microthermax Systems. The decrease of products sales revenues for the first quarter were partially offset by modest increase in sales of Microthermax disposable devices, and service contracts and other revenues along with increase in rental of microthermax systems on a decreased basis.
During those three months ended, we recognized partial revenue on one hyperthermia system, by comparison during the three months ended for the prior year November 30 2013. Total gross margins was 392,000 in the first quarter or approximately 47 percent of total revenues. This compares to 690,000 or approximately 52 percent of the three months ended November 30 2013. The decrease in gross margin and gross margin percentage over the year resulted primarily from the decrease in product sales. Operating expenses in total increase to 2.4 million for the first quarter of 2015, from 2.2 million for the comparable period last year. Research and development expenses declined about 30 thousand dollars to 470,000 compared to 500,000 from the first quarter of fiscal 2014.
Selling, general and administrative expenses increased to about 1.9 million from 1.7 million in the first quarter of fiscal 2014. That loss was 2.0 million or about 5 cents per share of fiscal 2015. Compared to a net loss of 1.5 million or 4.4 cents per share for the first quarter of fiscal 2014. As of the end of November, we had cash and cash equivalents of 6.2 million dollars and long term debt. Before I turn the time back to Clint ,I would like to say that take this time to say that we have gotten to know Clint quite well spending a lot of time with him over the last sixty days. I can tell you that he is a dynamic yet pragmatic leader, and he has demonstrated great success in commercialization and turnaround situations in med tech companies which is precisely, what BSD medical needs at this point in its life.
Now we just finished a three day spin in San Francisco and the JP Morgan conference. The JP Morgan health care conference is a huge conference where investors, strategists and analysts and other companies come together and present their stories and talk with each other network and look for resources that can help benefit each other going forward. And, we have a lot of very good meetings, I was impressed with the number of individuals that Clint knows in this area and hold him in high regard and respect and the story that we told during these last three days was very well received, so with that I will return the time back to Clint.
Clint Carnell – Chief Executive Officer
Thank you, Bill and thanks for your work, also wanna thank the employees the BSD medicals who have accepted me warmly and have really gone to work in a very passionate and committed manner. I recognize that you have been a long term shareholder at BSD that you are probably frustrated and we have some work to do to get things turned around. You have my commitment; my dedication and I believe we have something here that we can build a nice company around. I look forward to sharing our progress with you with the quarterly and yearly change of our fiscal year, will probably be made before our next earnings call, but I would like to plan on sharing with the investors as we understand more about how our programs are working so you can chart the progress and which is based on our turn around. So, with that Trish I will turn it back to you and thank you every one.38:25
Operator
For the Q & A sessions for analysts, to ask a question press star then 1 on the phone . If you’re using speaker phones please pick your handset before pressing the key. If any of your questions has been addressed and you’ll like to draw your question please press star then 2. Again a star then, 1 to ask a question. At the time we’ll just pause momentarily . Now we have a question from Dan Akovich from Maxim group. Please go ahead.
Dan Yankovich – Maxim Group
Hey Clint Congrats! Good to hear your voice again. Had a couple of quick questions and might have missed this or you might have said that you’re not discussing this right now but for the you guys coming out or fresh coming out with new micro.. microwave tips. Any indication on what potential differences you guys are targeting?
Clint Carnell – Chief Executive Officer
Yeah Daniel, I’ll speak in generality, first thanks for joining the call for the question. If you’re aware of the synchronous wave alignment technology one of the advantages we have with 915 is that we can go in and treat very delicate organs, say lungs, where there have been some complications with more powerful modalities. And we can allow to position the flexibility of multiple antennas to deliver enough energy to ablate the tumor while not compromising safety for the patient. Positions have asked us for new tips, primarily for a couple of reasons. One is to smaller ablation areas and also to do potentially more ablations with fewer antennas. So, I think what we wanna do is provide to position the tools to go when based upon their diagnosis. And provide more versatility than we do at this point. We think that is a significant advantage over some of the current technologies in the marketplace.
Dan Yankovich – Maxim Group
Got it, and then are those deficits gonna need their own indications is that what you were referring to, when you were referring to special indication.
Clint Carnell – Chief Executive Officer
No, I think from an indication stand point, the team has done, has some nice clinical work under progress and some that we are going to invest into this year with our university affiliations. But we believe there’s some opportunities to expand the safety and back by our clinical research team to give specific indications per specific organ. I think going forward what you’ll find more than likely as I learned about the space more is timing some of the new antenna tips with specific indications so that we can put the marketing efforts behind, having that well-known by the physicians.
There’s also opportunities to improve the perimeters by which we deliver energy, specific to the size of a tumor and vocation of the tumor. It’s kind of our version of big data that I think can be quite compelling as we go out in the market place. So, I still have a lot to learn. I’m just looking at some of the parallels from other business I’ve been in and I think technology is really sound. I think we can turn some of the knowledge, we have in housing the things that can help positions be more predictable say that it provides better outcomes.
Dan Yankovich – Maxim Group
If I could ask just one more. If.. If I understood correctly that the larger focus not razor blade and not the razor. Do you guys see utilization at the head when before this kinda gets adapted more widely?
Clint Carnell – Chief Executive Officer
Ah.. Yes and no. The programs that we’ve set out you know in the end once the vision is out there, the way we measure it and the way sense people need to be in alignment and what we’ll be sharing in the coming weeks and months with investors and analysts is a focus on cases and adoption by customer utilization. And, I think when you look at the building blocks of this business versus others then it is very straight forward than that. And it comes down to can you get more hospitals embracing this, more physicians. And then can you increase the utilization there and it’s quite compelling when you look at the economics. I’m not prepared to go to that part out on a limb. I can just tell you in this case that we have our current sales force focused on one case a week. And once we understand how well we execute on that we’ll be able to give better predictability that what our razor blade model might look like. And we’ll be sharing less likely the one metric that we’ve really focused our own team as well as the outside world on.
Dan Yankovich – Maxim Group
Do you guys have an approximate percentage of revenues that you wanna tribute to micro aah… pharamedics versus. Sorry the tips versus the system by the end of 2015?
Clint Carnell – Chief Executive Officer
I think by the end of 2015 we should have a very good indication of that. Right now I would say that my assessment has been that the company was rightly sunk. Not here to criticize the previous strategy but something has to change. And I would say that a disproportionate amount of time at trying to sell or convert cases to capital and I think given our cost of good percentage , focusing, giving good clinical evaluations. Flexibility for the hospital to purchase and getting the antenna tips to utilize as a better way to get short term and long term fraction per evident.
Dan Yankovich – Maxim Group
That wraps it up for me.
Clint Carnell – Chief Executive Officer
Great thanks Dan. Appreciate it.
Operator
At this time I would like to turn the conference back over to management for their closing remarks.
Clint Carnell – Chief Executive Officer
Ladies and Gentleman, as I have said before you get our commitment, you’ve got a group of dedicated employees that are behind the vision and I will communicate our progress. We will have things that go well and we may have challenges and I’ll do my best to provide transparencies so that you can understand how to invest in the company and follow our progress. So with that, thank you very much.
Operator
Thank you for your time today. The conference call is now concluded, at this time you may disconnect your line. Thank you, have a great day.
