American Shared Hospital Services (AMS) 2012 Q4 法說會逐字稿

Good morning, everyone, and welcome to the fourth-quarter and 2012 financial results conference call for American Shared Hospital Services.

At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions).

I would now like to turn the call over to Dr. Ernest Bates, Chairman and Chief Executive Officer; Craig Tagawa, Chief Operating and Financial Officer; Norm Houck, Controller of American Shared Hospital Services; and Ernest R. Bates, Vice President Sales and Business Development. Mr. Tagawa, you may begin.

Thank you, John, and thank you all for joining us for AMS' fourth-quarter and 2012 financial results conference call and webcast.

Please note that various remarks that we may make on this conference call about future expectations, plans, and prospects for the Company constitute forward-looking statements for the purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Company's filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K for the year ended December 31, 2012, and the definitive proxy statement for the annual meeting of shareholders held on June 7, 2012. The Company assumes no obligation to update the information contained in this conference call.

As you know, the recently enacted American Taxpayer Relief Act of 2012, or ATRA, included a provision, Provision 634,that reduces Medicare reimbursement for Gamma Knife services by approximately $4000 per treatment compared to 2012 Medicare reimbursement levels. Provision 634 is effective beginning today. In the three months since ATRA's enactment, AMS and other affected parties have engaged lobbyists and attorneys and have worked vigorously to have this provision rescinded or modified. While we have not yet been successful, we will continue to fight for rescission or modification of Provision 634. This provision was enacted under the assumption that Gamma Knife and linear accelerator-based radiosurgery treatments are clinically equal, and therefore should be reimbursed by Medicare at like amounts. This is contrary to a decision made by the Centers for Medicare and Medicaid in November 2012 just a few months ago and prior to Provision 634 that the different reimbursement rates assigned to the Gamma Knife and linear accelerator-based radiosurgery devices were appropriate. But just as important, we strongly disagree that the two technologies are clinically equal. There have been no randomized studies that demonstrate that Gamma Knife and linear accelerator-based radiosurgery are clinically equivalent.

Additionally, there is a significant difference in how these technologies are reimbursed by Medicare. Unlike the Gamma Knife, linear accelerator-based radiosurgery devices are reimbursed for every treatment session up to five treatment sessions.

And this is the key point -- since we believe a majority of linear accelerator-based radiosurgery devices treat patients in multiple sessions, the majority of linear accelerator-based radiosurgery treatments are more costly than Gamma Knife treatment, even prior to ATRA. This is why we continue to believe that, once all of the facts are thoroughly analyzed, the Gamma Knife's unequaled, clinically documented patient results and cost effectiveness will result in the rescission or modification of Provision 634. We believe our arguments are compelling and we'll fight for what we believe is the proper outcome. But that is not all we are doing.

We also are implementing an aggressive program to lower our costs. Among other steps, this program includes the subleasing of our office space, payroll reductions, and the refinancing of existing equipment loans and leases.

We expect the reimbursement rate cut to reduce revenues at AMS' five US retail Gamma Knife sites where the Company receives a percentage of the hospital's Medicare reimbursement. We do not know what, if any, impact the change in reimbursement might have on our remaining 12 US centers where AMS' revenue per procedure is contractually fixed with the hospital. As a result of this uncertainty, we are unable to accurately predict the effect that reduced Medicare reimbursement will have on our financial results.

To try to put things in perspective, if AMS' business mix in the last nine months of 2012 -- or 2013 is identical to that in the last nine months of 2012, we estimate that revenues would be reduced by approximately $500,000 to $650,000 and pretax income by approximately $300,000 to $400,000 during the period. Please note, however, that actual results could vary materially based on many factors, including payor mix volumes, the impact, if any, from the Company's other contracts, increases in treatment volume, our continued mitigation efforts, and the results of our cost reduction program.

Even as we work to mitigate ATRA's effects and reduce costs, we are moving forward in our Gamma Knife business. We continue to see opportunities to place systems at new and existing AMS sites, both in the US and internationally. This past January, the government of Turkey approved reimbursement under the country's health insurance program for treatment with the Perfexion system at Florence Nightingale Hospital Group in Istanbul supplied by AMS through our EWRS Turkey subsidiary.

Our newest Perfexion site, Sacred Heart Health System in Pensacola, Florida, began treating patients last week. The installation of our 14th Perfexion system at Northern Westchester Hospital at Mt. Kisco, New York, is scheduled for the second quarter of 2013. These recent additions to our Perfexion portfolio demonstrate that neurosurgeons and radiation oncologists who knows the competing technologies best continue to demand this unequaled stereotactic radiosurgery system for treating cancers and other diseases of the brain.

Turning briefly to our proton therapy business, construction at M.D. Anderson Orlando's Dedicated Proton Center is underway. We continue to expect this facility to begin treating patients next year. As we announced previously, AMS has received a firm financing commitment for the MEVION S250 Proton Therapy System we will supply for this $25 million facility. FDA approval of the MEVION device was received last year. The M.D. Anderson Cancer Center Orlando will be the model for additional proton centers we are developing. AMS owns approximately 1% of Mevion Medical Systems, the developer of the MEVION S250. In addition to the Orlando center, we are developing proton therapy centers in Boston and Long Beach, California which are expected to employ the Mevion device. We believe our equity investment in Mevion will turn out to be a valuable asset for AMS and our shareholders. AMS is also developing a one-room proton therapy center in Dayton, Ohio.

Now, I'll turn the call over to Norm Houck to review our financial results. Norm?

Thanks, Craig. For the three months ended December 31, 2012, Medical Services revenue decreased 8.3% to $4.125 million, compared to Medical Services revenues for the fourth quarter of 2011 of $4.5 million. Net income for the fourth quarter of 2012 was $5000, or $0.0 per diluted share. This compares to net income of $244,000, or $0.05 per diluted share, for the fourth quarter of 2011.

The number of procedures performed on Gamma Knife Perfexion systems supplied by AMS increased 8% for the fourth quarter and 8% for 2012 as a whole, compared to the same periods of 2011. The Perfexion system AMS applied to Florence Nightingale Hospital Group in Istanbul that began treating patients in May contributed to this growth.

The total number of procedures performed in AMS Gamma Knife business, including Gamma Knife and Gamma Knife Perfexion procedures, increased 1.9% for the fourth quarter and 7.1% for the year as a whole compared to the same periods of 2011. Revenue decreased despite the increase in procedure volume, primarily due to variations in the mix of procedures by location.

Medical Services gross margin for the fourth quarter of 2012 decreased to 37% compared to Medical Services gross margin of 39.5% for the fourth quarter of 2011.

Selling and administrative expenses for the fourth quarter of 2012 increased to $952,000 compared to $840,000 for the fourth quarter of 2011. This increase was primarily due to unusually low legal and public reporting related expenses in the fourth quarter of 2011.

Operating income for the fourth quarter of 2012 was $56,000. This compares to operating income for the fourth quarter of 2011 of $325,000.

For the 12 months ended December 31, 2012, Medical Services revenue decreased to $17.048 million compared to Medical Services revenue of $17.237 million for 2011. Total revenue for 2011 of $22.221 million included revenue from the sale of a Perfexion system to Lehigh Valley Hospital of $4.984 million. This transaction resulted in pretax income of $844,000, which was recognized in the third quarter of 2011.

Net income for 2012 was $38,000, or $0.01 per diluted share. This compares to net income for 2011 of $506,000, or $0.11 per diluted share, which included income from the Lehigh transaction.

Cash flow, as measured by earnings before interest, taxes, depreciation, and amortization, or EBITDA, was $2.067 million for the fourth quarter and $8.306 million for 2012. This compares to EBITDA of $2.493 million for the fourth quarter and $9.265 million for 2011, which included income from the Lehigh transaction I mentioned previously.

On the balance sheet at December 31, 2012, cash, cash equivalents, and Certificates of Deposit were $10.564 million compared to $11.580 million at December 31, 2011. Shareholders equity at December 31, 2012 was $24.830 million or $5.39 per outstanding share. This compares to shareholders equity at December 31, 2011 of $25.171 million or $5.46 per outstanding share.

Craig?

Thanks, Norm. Now we'd like to open a call to questions. John, we are ready for the first question.

Thank you. We will now begin the question and answer session. (Operator Instructions). Steve [Miscagian], Miscagian Investments.

You talked about you're taking steps to have the ATRA provision rescinded. Could you provide more color on that -- what exactly you're doing?

I think what we are doing is we are educating many of the lawmakers as to really the differences in how these technologies treat patients. If we look at, as we've mentioned in our releases, how linear accelerator-based radiosurgery devices treat, the majority of their treatments are done with multiple fractions. We believe this is close to four fractions per treatment. The Gamma Knife treats in one fraction.

So, if you look at the cost to CMS and you take into account the cost of fractionation, the cost of just the delivery codes -- not taking into account any ancillary codes -- and if you look at the 2012 rates, they are very close in amount. So I think what we are looking at is to say that the rate adjustment for the Gamma Knife is unfair in that they are previously, if you take into account how these two technologies are reimbursed in an actual manner, that they were already being reimbursed very, very similarly in amount. That's why we feel that the reduction to the Gamma Knife was unjustified.

Steve, it's our -- this is Dr. Bates -- is that we were not treated fairly here. The Gamma Knife was not treated fairly and our partner elect feels the same. The average lin-acc course for a brain was about 2.41 fractions at -- when you looked at all brain episodes. If you looked at the multi-faction episodes, it's 3.89. So clearly, the patients are being inconvenienced more. They are coming back at least four times for a treatment that could be done at one time with the Gamma Knife. And the average reimbursement for both of these machines is close to $7000. There wasn't a big difference. Yet we've been harmed by reducing us by $3000 and not doing the same for the lin-acc.

Sure.

So there's really no cost savings here. We are collecting the data, and we feel very strongly, by the end of the year, we will have enough data that we can give the lawmakers to show that, if you look at the data, the savings that they are predicting of roughly $400,000 over 10 years is not going to happen. If anything, the cost may go up, and hopefully we'll have that data in the next few months.

Okay. That's -- you've presented a compelling argument, but what exactly has been done to reach out to the lawmakers, to tell your story, or has that not been done yet?

That has been done, but it's an ongoing process. Remember, we only had a couple months to gear up our efforts, and we've hired lobbyists. Some of the people that we are working with have also hired lobbyists and attorneys, as we mentioned previously, to really -- the staffers of lawmakers -- to really educate them as to the fine points of how the technologies treat from a clinical standpoint so they can understand the reimbursement aspects and the impact on CMS of the various methods that each of these technologies that are reimbursed and how they actually treat patients.

I want to point out again, Steve, this is just an unprecedented action.

I know.

CMS just opined in November that the reimbursement for the Gamma Knife based on its cost to provide the service was appropriate and right. This has never been done before, that you could go to one legislature who would step in and introduce a law that would bypass a system that has worked for many, many years, and that clearly is a fair system.

Yes.

What has been done here is unfair.

Agreed.

Going on to another question, immediately after this came out, and this was in early January, a Gamma Knife Center, I believe it was in Spokane, they came out and said that if this sticks, that they may go out of business because they just won't be able to make enough money doing Gamma Knife treatments. Do you see this happening if it does stick?

Well, we are not going out of business. We are in here for the long run. Elekta is not going out of business. We both strongly support the Gamma Knife, and we are going to be around with the Gamma Knife for many, many years. And by the way, I think that senator retracted that statement.

Okay. All right. Now, ATRA, it cut Medicare reimbursements. Do you also see cuts from insurance company reimbursements for non-Medicare treatments?

You know, we don't at this point, mainly because the rates are not generally tied to Medicare.

Okay.

And historically, private payors have always paid more for services than Medicare has, so hospitals are used to that.

Okay. If ATRA does stick and you now have Gamma Knife systems that will be getting a much lower reimbursement for Medicare treatments, do you anticipate a material reduction in the value of the Gamma Knife systems on your balance sheet?

We'll have to look at that as that situation arises. Of course, you're talking about whether they are impaired or not.

That's right.

From a GAAP standpoint, we'll have to look at that, if it sticks.

Norm, do you want to explain how that would differ from Gamma Knife to Gamma Knife?

Sure. Each one of our sites is accounted for separately, and some obviously do better than others, so we'll have to look at each site on an individual basis to see whether it meets the impairment test or not.

Okay. Now, it has been -- it has been three months since ATRA occurred. Can you provide any color on what will happen to the revenues at the other 12 centers where you get paid a contractually fixed amount?

We can't -- we cannot at this point. We are still uncertain as to what the effect will be. We will know more when we report the -- probably the first quarter's results.

Okay. Let's see. Moving on to the proton beam centers, on the 8-K -- or was it 10-K, I forget -- you said that the construction of the first MEVION S250 was taking longer than expected. Can you provide some color on that?

Yes. I think you're referring to these the first gen of the Barnes Jewish.

That's right. Yes.

And, you know, they are continuing to commission the unit and to make sure that it's -- that all the beams are aligned. We'd expected the first treatment to be a little earlier in the year, but I think, at this point, it's probably going to be sometime in the third to fourth quarter of this year the first treatment will be completed.

Okay.

There is nothing that we know of that would tell you there's a significant problem other than this being the first unit and the first unit always takes longer than you expect.

So hopefully we'll see the first patient treated in September of this year.

Yes, that's what we're told.

Okay. And you talked about the center in Florida is having a firm financing commitment. For the other three proton beams centers, do you have firm financing commitments, or where do they stand right now?

No, we do not yet. We are starting to work on lining that up at the present.

We are reasonably confident that we will get financing for those machines. We've been meeting with several institutions that have expressed their willingness to look hard at it and consider financing it. And what everyone is waiting for is for the first patient to be treated at the Barnes facility. And then I think you'll see things really opening up. We were in Europe recently talking with a firm that is looking at possibly financing multiple machines for us, once this issue of the first machine up and running.

I think what is very clear if you look at this industry now is that our position of only doing single rooms was a sensible and economically feasible thing to do. A lot of these machines that are now four rooms are not getting the numbers that they had expected. If they were one room, they all would be doing remarkably well.

Okay. Going back to a question that was asked last quarter, it was mentioned twice -- why not hire an additional salesperson or people to go out and sell the Mevion or other proton beam equipment, and your response to that question -- well, we have three people that are doing that. I assume that to be both Bates and Mr. Craig Tagawa. And then after that, on the call, it was mentioned that, you know, we are really busy doing this and we are really busy doing that. I felt the impression was that maybe there are three people out selling, but they are not doing it full-time. And another person mentioned one sale of a single PBRT unit would pay for that salesperson many times over. So why not go out and do that? What's the reason there?

I think one of the reasons is, at this point, we want to make sure of the timing of the first unit. And remember, the other factor is we have to put deposits down when we -- on additional units. So I think we are being prudent about the timing of when we do all this. We have additional people that already want to get Mevion systems, so I think we are concentrating on waiting to see what happens with the first unit first.

Steve, we have 17 facilities where we have Gamma Knives, and at least half of these will be appropriate for protons. And they have already expressed an interest in getting protons once the first machine is up and running. So those are places where you don't really need the full sales cycle. They are ours already. We only have 10 employees. We are trying to keep our costs down, but we have, besides those of our own facilities, we have several hospitals that come to us and said we are interested in getting a Mevion once it's up and running.

Okay. Okay, that's it. Thank you for the answers to the questions.

Thank you for your questions.

Tony Kamin, Eastwood Partners.

A little more specificity maybe around the -- if you could give it around the targeted cuts. You've had the figure in there of sort of potentially a $300,000 to $400,000 hit to pretax income. And since the Company is sort of just mildly profitable, that would indeed be a pretty big hit. So, are you targeting the cuts that you mentioned to be in that range of the $300,000 to $400,000?

I think, Tony, we are looking at cuts that may be greater than that. We are looking at cuts in rent; we are looking at cuts in payroll, including all salaries; we are looking at changes in our maintenance contracts. And we pay about $1.5 million in service contracts for our Perfexions. We are looking at all of these things. We just reduced our rent by anywhere from $130,000 to $150,000 a year. Is that the right number, Norm?

Close.

Okay. Well, I think that's very appropriate. I think that's great.

The previous caller asked some of my questions around the Mevion, but let me just try to ask this. I guess I didn't think that the Barnes testing would take so long. So, I guess I'm surprised that 10 months after FDA approval we have the same number of signed contracts as we did prior to approval. I heard what you just said -- that you are talking to a lot of people, but I didn't really anticipate, I'm not sure the Company anticipated, this Barnes testing taking so long. So once that happens, would it be reasonable to expect that, when that logjam breaks, you might be able to sign multiple new proton contracts within a reasonable period of time?

Yes. I would say yes. We'll have to find the deposits, but we are looking for outside investors. We've got several who want to help us with that. Yes, we will be signing more contracts, but that is a problem. The people that have agreed to finance our unit in Orlando want to do more, but they are not going to do more until the machine in Barnes is up and running.

Got it. I just think that, considering the uncertainty that will be around Gamma Knife for -- at least until you can get potentially some government change, I just think that the valuation of AMS in large part, any valuation improvement is going to depend on showing some momentum in the proton business. So, obviously, I think you guys know that, but I think that's what -- that's particularly what I'm looking for in terms of seeing the Company getting on the track that people will be able to understand where the future growth will come from. So in that light, on the non-Mevion system, I thought I heard Craig say that the Kettering is now a one-room system in his prepared remarks? Or I think you just said Dayton, Ohio. But is that a change? And where are you at in terms of the progress with Kettering?

We are looking at -- we had always looked at starting with one treatment room. I think we are very consistent in terms of that. All of our sites may eventually have more than one treatment room if volumes dictate, but going forward, as Dr. Bates mentioned, we think using a one treatment room concept is the most prudent financially, and that is the model we are going to use going forward. We may increase it, just like, traditionally, radiation therapy departments, as they are volume dictates, they might get a second linear accelerator or a third. We are going to use the same principle now that the technology is available that you can do that.

These four and five room systems were built predicated on the fact that you could keep the cost per room down and that there would be more than enough patients to pay for that type of capital. That, in many cases, hasn't been borne out, but as Dr. Bates mentioned, even the ones that aren't performing up to what they had hoped, they would all be more than enough patients for a single-room center. So we are progressing with our project in Dayton, just like we are on the others. And as we get closer, we'll obviously provide more information.

Yes, there was a pretty interesting article I saw today from something called Exconomy where even a couple oncologists who were skeptical of the big four room centers said they are very interested in what Mevion is doing. So, I think you clearly were ahead of the curve on that.

The final question I have -- in terms of Gamma Knife going forward, if the revenue levels are cut by Medicare as much as they are, how is Elekta going to respond? It just strikes me as common sense. You can't sell a machine for X if the person who is buying it is going to get a portion of the revenues they were before. So how is Elekta responding, and have they found ways to help cushion the impact on AMS a little bit?

Yes, Tony, they have. We have had two meetings with Elekta in the last month, one most recently in Sweden. There are things -- we have a game plan with them to deal with this if we don't get it rescinded. I don't think we want to divulge it in this call since our competitors are obviously listening to this call. We don't want them to know what our strategy is, but we have a game plan to keep the Gamma Knife, even at these lower rates, competitive.

Great. Actually, I have one more. Can you talk a little bit about -- I noticed a percentage of revenues that included some revenues from Turkey that was higher than I thought. Can you talk about your experience so far and --?

Yes. I want Ernie to talk about Turkey and the international in general, because the international has turned out to be a much better project then even what we had predicted. It was slow starting, but it's beginning to take off. If you notice that the increased number of treatments that we've announced in the end of the year -- a lot of these came out of Turkey. You want to say a word about Turkey and how we are doing there? Profit wise?

Sure. Hi, Tony. So as you are aware, we are up and running at two different sites in Turkey. In Istanbul, we have a Perfexion Gamma Knife treating patients. We also have, in southern Turkey in a town called Adana at Baskent University a Gamma Knife and also an Elekta radiosurgery device called the Access. We are doing quite well on the Gamma Knife in Adana, trading upwards of 40 patients a month. So, we are starting to see the high volumes we anticipated happening at that site.

We are also almost at maximum capacity on the Access. This Access unit is one of the few dedicated radiosurgery devices in that region, so we are seeing a lot of interest. We're starting to focus more on marketing these devices, that there is more awareness within the physician community and also among patients. We are starting to see quite a bit of self referral business coming into both of those centers. So we think that the marketing will be key for us to continue to bring in patients from not only within Turkey -- domestic patients -- but we are also bringing patients from outside of Turkey. So, we think that this is going to be an interesting model for us going forward in terms of diversifying revenues from the Gamma Knife and other radiosurgery businesses.

Have you seen any further interest in -- because of the early success there, have you seen any other interest coming out of Europe or that part of the world?

We are. We are, Tony. We are seeing interest in other markets. We are trying to take a very measured approach. Until now, we have taken a fairly measured approach to setting up these businesses, because as I'm sure you can imagine they are obviously costs involved with setting up these businesses. And of course we are looking at different legal and regulatory structures. So it takes quite a bit of legwork in setting up each of these international businesses. But we are quite confident that we can replicate what we have done in the US in select international markets. We have chosen Turkey to be that market -- one of those markets. And we are looking at some others now as well where reimbursement actually remains quite strong. Perhaps there may be some impact from what we are seeing in the US, but we haven't seen it yet in some of these more developed markets where reimbursement is actually higher.

Do you want to say a word about Peru? Because that machine should be starting up this year.

Yes. Peru, we are still working on getting our unit placed in Peru. Obviously, the economy continues to perform very strongly there, and we look forward to placing the first Gamma Knife in the country there. So, again, we are just dealing with some permitting issues, and once we get those matters resolved, we expect to have that unit sent down to Peru and to begin treating patients later this year.

Great. Well, thank you guys very much.

Thank you Tony.

Tony [Pollack], Aegis.

Good afternoon. Could you tell us what the value of your equity investment in Mevion is on your balance sheet?

It's about $2.7 million.

Okay. And has that been revalued upward or downward over the last few years?

We have not. We consider that a temporary impairment.

Okay. And can you tell us when you expect to get a first revenue from the proton therapy and whichever will be the first one?

For us, it will probably be sometime in the latter part of 2014.

Okay. Would that be Orlando?

Correct.

Okay. The rest of my questions have been answered. Thanks.

Our next question --

We might want to add to all of you that our unit that was going into Boston was most likely probably may go elsewhere. And Craig is shaking his head at me, but we have a good opportunity to put a machine in San Francisco, to be the first one in San Francisco. I am quite excited about it. Obviously, it will be one of the busiest proton machines in the country.

Mason Matschke, Raymond James.

Hi Dr. Bates and Craig. How are you doing?

As a long-time shareholder, we invest in this company because we saw a great opportunity in the future for some of these new technologies. As what happens many times, there's delays and changes. And as you said, this is unprecedented what just happened with the Medicare reimbursements. And a lot of us have been asking for the last year since we've had some of these delays in getting to substantial revenues and profits that the Company announces some type of cuts to payroll, to rent, to ease some of the pain the shareholders have had, possibly, while we have been waiting.

And I was really disappointed that you came out in your press release and you didn't announce specific cuts. We have waited a long time for this. And as a shareholder, I do believe in the opportunity, but right now there's a lot of uncertainty, and the share price has been severely damaged since last summer. We have taken a drop from the $3.40 level all the way down to $2.00.

So I would hope that -- I can see your next call is maybe in another six weeks, but even before that, if we can have some specific information on what the cuts may be and what the savings may be over time. I think a lot of shareholders, including myself, would greatly appreciate that. We have held in for a long time, and I think we all believe you are going to hit that opportunity that we have been waiting for, but it would be nice to take some cuts along the way that may help shareholders and increase shareholder value, and maybe we can start moving towards the net asset value of the Company. I just wanted to kind of get your input on that, and then I had another question for you.

Yes. I think what we did say, Mason, is there will be salary cuts; there will be reduction in rent. We don't have the exact number yet. And there will be cuts in our maintenance contract. We are looking at renegotiation -- renegotiating our leases. There will be cuts. And as soon as we have a final number, we will give you that.

Okay. And then I had another question -- and I know other people have asked this in the past, but I think, with the changes that are possibly going to be happening with the revenue and the importance of what we are going to see with the European business, do you feel that you guys could disclose the EBITDA cash flow numbers, P&L for your international operations so we can kind of get a better gauge on how the profitability is of that area? Then if you broke out the Gamma Knives and Perfexion knives so we can kind of see where the revenues are coming and how the savings may be helping in that area?

I think we haven't done that if they are considered one business segment. So, we haven't done that in the past. Also, for competitive reasons, we haven't wanted to do that. So, as a management team, we could re-look at that and we could re-look at it with our auditors as well as what would be the appropriate disclosures.

I would greatly appreciate that. You know, I can see your potential for growth in your international operations, and I think it may give some comfort to some of the longer-term shareholders that you are seeing some growth in that area.

Yes, but I think, Mason, we have said we are not going to expand that area until our existing machines are clearly on the track to be highly profitable because the European market, as you know, does have its own difficulties.

Okay.

We are being very cautious. We are now at the point of only -- we've got three machines, Ernie, is that correct?

Correct.

In the immediate future, we have no plans to go beyond those three, even though we have been asked to put another machine or two machines in Turkey.

Well, as a small company, it would help me as an investor and other people that analyze the returns of the Company just to get an idea of the EBITDA from your international business just to -- just as a way to grade the management and really to look at how you're doing and how we can look at maybe how some new businesses will do. I mean, this is a small company, and the share price is going the opposite direction. You've had some important milestones with some of the investments you've hit with Mevion, but we are seeing the shares go the wrong way. And I understand that what happened was unprecedented, but it happened. I think we are going to have to do some unprecedented things to improve shareholder value. This delay in St. Louis, it's just another setback. We were hoping that that may come out in May. So just everything takes longer, and I'd like to just -- I'd like to see some of the --.

I understand your frustration. We feel the same way. Those deposits were made on those machines in 2006, and here we are in 2013.

Well, we are losing our money on our value of our shares. You're still getting paid the same thing for the last 10 years, Dr. Bates. So I really would like to see you take a pay cut.

(multiple speakers)

That's it for my questions. Thank you.

You pointed out that I haven't had a raise in 10 years. Thank you. And we will be taking pay cuts, including me.

Lenny Dunn, Freedom Investors.

Good afternoon. First, I want to make a couple of comments, and then I have a question.

When you discuss the fact that this is unprecedented and unfair, you are preaching to the choir. But hopefully the lobbyists that are working on this will be able to get through to some of these senators.

And I would like to also comment that the Huffington Post and Wall Street Journal, which probably have never agreed on anything before, both published articles about the unfairness of what Harry Reid did and how he snuck it in the middle of the night into the bill. So in general, I think your argument is very strong, and again, having the Huffington Post and Wall Street Journal agree on it is unprecedented also.

Now, that being said, my question is -- we don't have to know what the entire basket of groceries is going to save us. But whatever you've done with rent and with subleasing certainly could be clarified. I mean, this could be done in various announcements, and some of them you may have already done, I would hope, because it has been a few months, and some of them you may be working on. And I do appreciate the fact, Dr. Bates, that you are taking a pay cut under the circumstances, because it is unprecedented. And we get this thing going the way it should -- again, I have no problem with you getting your pay reinstated. So we are all on the same side here.

So is it possible to get some releases as to what things you've already done as opposed to waiting until you can announce everything you're going to do?

Well, we don't want to divulge our strategy to the people we are negotiating with at this point. I mean, I can tell you the rent has been reduced, as I said, $130,000, $150,000 a year.

Have you moved out of the sub-leased space yet, or are you still --?

Yes, we have. We just -- we're retaining like 1000 square feet here, which we couldn't rent.

Well, I understand, and it would be a material event. You probably have a few employees that would have difficulty commuting the other way. So, I would understand you might need some space for that reason. But a little more clarity with your shareholders who are trusting and are patient would be very much appreciated.

Well, you can help us, Lenny, by getting in touch with your legislature and letting them know how unfair this action is. You can help us and the shareholders with that. And I say that to all of you because, as I've said, this is unprecedented. It is unfair.

In that case, Ron Johnson and Paul Ryan would certainly agree with you. But that's not everybody in the country. That's our Wisconsin people. So -- but I just think that we need to have as much knowledge as we can out there to work with so it's easier to be patient. I don't have anything further.

Thank you, Lenny.

Mr. Tagawa, there are no further questions. Would you like to make your closing remarks?

I'd just like to thank everybody for joining us this afternoon, and we look forward to speaking with you on our 2013 first-quarter results conference call in May.

And I'll turn it over to Dr. Bates for his final remarks.

Well, I just want to let you all know that we are going to continue with Elekta, our partner, to fight to get this thing rescinded. As we've said earlier, it is unfair, and I think that the Company going forward is looking at other opportunities. I think we are not going to be the same company we were last year. We are expecting to announce an agreement with our OR 21 finally after all these years. Craig, are you going to say word about that?

Yes. We have been working on some very unique lighting systems where we have patents with a partner of ours, and hopefully we will be entering into a licensing agreement in the not-too-distant future from now.

We have been asked to look at an intervention MRI business. This is something we looked at 10 years ago with a major university hospital. We are looking to see if that's economically feasible. People come to us with these opportunities because we have been around so long, and that may be a new and exciting business for us. We're going to spend some time evaluating it.

But again, we think this is unfair. We think we will get this changed. If we don't get it changed, we will continue to do Gamma Knife business. We may do it in a different way. But I want to remind you all that there are 130 Gamma Knife in the United States. These 130 are all fighting to get this thing changed because they have all felt that they had not been dealt with fairly.

In the end, I think this is going to cost our government more money by this action. We just need to be able to demonstrate that and show to the Congressional Budget Office that this will not save money, and if we are effective in doing that, we will get this thing changed.

Those are the only comments I have to make.

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