Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Anthony Vendetti with Maxim Group.
Anthony Vendetti – Maxim Group
I just have a couple of quick questions on the J&J agreement. Any more color, Joe, that you can provide on that? I know that’s been going well, as you said, and just give us a little bit more color on the different applications that you’re working on with them, and if you can give us a broad range of maybe when we could expect something submitted to the FDA.
Joseph P. Caruso
All of those specifics are actually in confidence and pretty close to the vest between us and J&J. We have moved the program along nicely. It’s been a great collaboration with the J&J folks. We’re happy with the progress, but we’re not really allowed to talk about a lot of the specifics around the program. We do think that the things that we are working on with J&J are very big opportunities for us in markets that are the right markets for this type of technology, and we’re hopeful that we’ll be successful in that program and that’ll also give us quite a nice incremental business that we don’t enjoy today.
Anthony Vendetti – Maxim Group
On the gross margin side, it came down a little bit obviously. You’re working in a difficult environment right now. Do you expect the product gross margin to stabilize around the 54-55% range, or if necessary, you won’t take down prices just a little bit more to be competitive if you’re seeing some discounting going on from your competitors?
Joseph P. Caruso
We haven’t really seen big discounting in these products. They’ve stayed within a range that is acceptable. What does affect the margin especially for is the volume—the overall total volume of revenue that goes through the plant because there is quite a big percentage of cost that is fixed cost as well as the geographic split. We’ve been increasing the amount of overall revenue that is from outside the US or outside North America, and that comes in at a lower gross margin, but we also don’t have the marketing and commission costs associated because we go through full service distributors for those types of sales, so what we do is look at really managing the business, managing pricing, managing margin, managing our costs to be in line with our goal through this economic slowdown, which is a neutral cash position and we were successful in doing that. Actually we had $700,000 of positive cash flow during the quarter. If things change and if some of our competitors do things that are different or do things that are different on pricing, we might take another look at it, but so far we haven’t had to really slash prices to maintain the positive cash flow that we see.
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